Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — MINISTRY OF LABOUR

Unemployment and Unfilled Vacancies, Bournemouth

Mr. Cordle: asked the Minister of Labour what is the number of persons unemployed in Bournemouth and the number of unfilled vacancies at the latest available date.

The Minister of Labour (Mr. R. J. Gunter): At March, 1968, there were 3,380 persons registered as unemployed in the area covered by Bournemouth, Christchurch and Poole Employment Exchanges and 1,290 notified vacancies remained unfilled.

Mr. Cordle: Since an unfair burden will be laid upon the hotel industry—

Mr. Atkinson: On a point of order, Mr. Speaker. Might I draw your attention to the fact that the amplification system does not appear to be working? We cannot hear what is being said.

Mr. Speaker: I cannot hear the hon. Member for Tottenham (Mr. Atkinson) because the microphones are not working. Mr. Atkinson, a point of order?

Mr. Atkinson: That was my point of order, Mr. Speaker. I was attempting to direct your attention to the fact that the amplification system is not working.

Mr. Speaker: Perhaps Ministers and hon. Members will speak up.

Mr. Cordle: As Bournemouth relies heavily on employment in the hotel industry, is it possible for the Minister to look again at the unfair burden imposed on that industry by the Selective Employment Tax?

Mr. Gunter: I cannot give the hon. Gentleman the answer that he has asked for.

Mr. Atkinson: We cannot hear.

Mr. Gunter: There has been a slight improvement in the position in Bournemouth since January. Another complication at the moment is that Bournemouth is such a delightful salubrious spot that it attracts a large number of retired people, and a quarter of the unemployed male persons on the register are men over 60.

Selective Employment Tax

Mr. Dance: asked the Minister of Labour whether he will now make a statement on the treatment of slaughterhouses following his review of Selective Employment Tax classifications.

Sir J. Gilmour: asked the Minister of Labour whether he is now able to announce the result of his review of classifications for the purposes of the Selective Employment Tax.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Roy Hattersley): I hope to be able to announce the result of the review before Easter.

Mr. Dance: Is it not extremely unjust that a slaughterhouse run by a municipal authority should escape Selective Employment Tax completely whereas one that is privately run bears this burden, which has been increased by 50 per cent. recently?

Mr. Hattersley: I cannot comment on either the justice or injustice of the situation until the review is completed.

Sir J. Gilmour: Would not the hon. Gentleman agree that he will be failing in his duty if he does not ensure that industries in the export field are exempted from Selective Employment Tax?

Mr. Hattersley: I do not think so. I do not think that with the Selective Employment Tax the Government have ever sought to discriminate in favour of exporting industries.

Mr. R. Carr: Can the hon. Gentleman say whether the results of the review will be implemented by the Chancellor of the Exchequer in the Finance Bill?

Mr. Hattersley: I think that implies that the review will have some results which may lead to a reclassification. But this is a hypothesis that I do not want to go into.

Building Industry, Scotland (Unemployment)

Mr. Edward M. Taylor: asked the Minister of Labour how many people were unemployed in the building industry in Scotland at the most recent date for which figures are available; and what were the comparable figures at the same date in each of the previous three years.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. E. Fernyhough): At February, 1968, there were 16,360 persons registered as unemployed in Scotland who last worked in the construction industry. The corresponding February figures for 1967, 1966 and 1965 were 14,990, 10,300 and 13,340 respectively.

Mr. Taylor: Is it not criminal that we should have 16,000 building workers unemployed when we still have thousands of Glasgow folk suffering from the effects of storm damage? Will the hon. Gentleman help to organise a national recruiting campaign so that the efforts of these men can be concentrated on relieving the real suffering in Glasgow?

Mr. Fernyhough: I think that the last part of the supplementary question should have been addressed to my right hon. Friend the Secretary of State for Scotland, but the hon. Gentleman must know that no Government in all the post-war years have done more to meet the housing needs of Scotland than the present Government.

Mr. William Hamilton: Is it not the case that a great proportion of these unemployed persons are unskilled? Can my hon. Friend say what the shortage of skilled men is?

Mr. Fernyhough: I am sorry but I cannot give my hon. Friend that information without notice.

New Jobs, Scotland

Mr. William Hamilton: asked the Minister of Labour what estimate has been made of the number of new jobs that will be created, in Scotland and Fife

respectively, in the telecommunications industry in the next 12 months.

Mr. Fernyhough: I am sorry no estimate is possible for the whole of Scotland but about 500 new jobs should be created in Fife over the next 12 months as a result of the G.E.C.-A.E.I. plans to expand their factories there and it is expected that there will be further expansion beyond that time.

Mr. Hamilton: Can the hon. Friend explain the apparent disquiet among workers there that there might be a rundown at the factory in Glenrothes? Can my hon. Friend give the proportions as between male and female jobs among this figure of 500?

Mr. Fernyhough: I am not in a position to tell my hon. Friend why there should be such concern at Glenrothes. We have no information which would substantiate such concern in any way. Nor am I in a position without notice to tell him the proportions of male and female jobs among the 500.

United States Firms, Scotland (Trade Union Recognition)

Mr. William Hamilton: asked the Minister of Labour how many United States-owned firms operating in Scotland refuse to recognise trade unions; and what steps he intends to take to encourage these firms to conform to the generally accepted practices of British industry.

Mr. Gunter: No precise information is available about the number of firms, whether American-owned or otherwise, that do not recognise trade unions. My industrial relations officers are very ready to help resolve differences between employers and unions about recognition.

Mr. Hamilton: Does not my right hon. Friend regard it as regrettable that the Ministry does not have this information? Will he seek to get it? Does not he recognise that American firms in general do not recognise trade unions and seek to contract out of this obligation by paying slightly above the trade union rate?

Mr. Gunter: We have never compiled that information either about British-owned or about American-owned firms. It is always regrettable to me when trade unions are not recognised if the workers


want them recognised. I should like to say, however, that I find no difference in attitude between American and British employers here. They are either good or bad or half way between the two. In my dealings with American firms here, I have found no indication that they are more awkward than some British firms.

Sir J. Gilmour: Is it not the case that many American-owned firms, through plant bargaining, pay higher wages than United Kingdom firms?

Mr. Gunter: That is true.

Unemployment

Mr. Eadie: asked the Minister of Labour what change in unemployment levels in Scotland is forecast in the light of the Budget policy.

Mr. Gunter: I am not prepared to give a forecast of the future level of unemployment.

Mr. Eadie: With 136,000 unemployed in Scotland in 1963, when hon. Members opposite were in office, and 86,000 unemployed now, is it not desirable that the Government should not cultivate the habits of the Opposition because of budgetary policy?

Mr. Gunter: I immediately agree with that proposition.

Mr. Bruce-Gardyne: Would not the right hon. Gentleman agree that it is wise not to make forecasts in the light of Budget decisions? Is it not inevitable that increases in the S.E.T. and excise duties will have serious effects on the level of employment in Scotland, particularly outside the central industrial belt?

Mr. Gunter: I have always refrained from making prophecies about unemployment, not only since the Budget but before. One of the reasons for this is that certain prophecies were made by the Opposition about the level of unemployment in December and January which were proved false, and I do not claim to be a better prophet than they are.

Mr. Eadie: asked the Minister of Labour what employment and unemployment trends are forecast for the coming year in the light of Budget policy.

Mr. Gunter: I am not prepared to give forecasts of the future level of employment or unemployment.

Mr. Eadie: Does my right hon. Friend recognise that that Answer is very unsatisfactory? In view of the position in Scotland it is necessary that the Government should not relax their efforts to ensure that there is no increase in the trend of unemployment.

Mr. Gunter: I agree. Indeed, the efforts of the Government have been directed, with some success, to meeting that situation in Scotland.

Sir G. Nabarro: Is the right hon. Gentleman aware that the Chancellor of the Exchequer also refuses to give any estimate of future unemployment? To whom can we go? Is this the Government who seek to plan everything for the future except full employment?

Mr. Gunter: It is just a desire to refrain from the dangerous area of prophecy.

Mr. Atkinson: My right hon. Friend the Prime Minister said yesterday that the alternative to the wages policy was 1 million unemployed. What work has the Ministry of Labour done on finding out whether the equivalent of 500,000 unemployed plus the 3½ per cent. wage norm is equal to 1 million unemployed?

Mr. Gunter: I have a shrewd suspicion that that supplementary question should be directed to my right hon. Friend the Chancellor of the Exchequer.

Shipping Industry (Redundancy Payments Act)

Mr. Ridsdale: asked the Minister of Labour if he will seek to amend the Redundancy Payments Act so that it applies to redundancy in individual companies in the shipping industry and not to the industry as a whole.

Mr. Gunter: The Act already applies to redundancy in individual companies, in the shipping industry as in industry generally. But the National Maritime Board wishes to substitute for the statutory provisions a scheme based on redundancy in the shipping industry as a whole. This scheme, which has been agreed by the unions and employers concerned and which is on the whole more generous than the statutory scheme, has my approval. I hope shortly to lay before Parliament the draft of an Order


which, subject to Parliamentary approval will allow the industry's scheme to be brought into operation.

Mr. Ridsdale: Is the right hon. Gentleman aware that seamen, particularly on short sea routes, think that this is operating gravely against them? Will he look again at this matter, particularly as it affects short sea routes?

Mr. Gunter: I take the point about short sea routes. The new agreement between the unions and the National Maritime Board is more generous on the whole than the existing arrangements.

Departmental Staff, Portsmouth

Mr. Judd: asked the Minister of Labour what action he has taken to improve the staffing of his Department in Portsmouth following recent closures in the neighbourhood.

Mr. Fernyhough: To deal with the redeployment of redundant workers in the area, the staffing of my Department in Portsmouth has been improved by allocating two experienced officers temporarily and one on a long term basis. In addition two clerks have been engaged locally.

Mr. Judd: Is my hon. Friend aware that, in the area, there is great admiration for the work of his Department in the recent difficult situation? In view of possible significant changes in the employment pattern in the area there is widespread hope that he will keep the staffing and resources of the Department under constant review.

Mr. Fernyhough: I am happy to have heard that tribute and I will see that it is passed on to the staff. My hon. Friend can rest assured that we always keep the staffing position under review.

Unemployment, Portsmouth

Mr. Judd: asked the Minister of Labour whether he will make a statement on the unemployment position in Portsmouth.

Mr. Fernyhough: On 11th March there were 2,595 persons—2,195 men and 40 boys, 317 women and 43, girls—including 11 temporarily stopped regi-

stered as unemployed at the Portsmouth employment exchange. The unemployment rate for the Portsmouth travel to work area was 3·1 per cent. compared with 3·2 per cent. in February, 1968, and 3·1 per cent. in March, 1967.

Mr. Judd: Does not my hon. Friend agree that this is almost the highest level of unemployment for the region as a whole? Does not he further agree that, if we are to have economic growth in the country as a whole, we cannot afford to under-utilise labour resources in the South-East?

Mr. Fernyhough: We cannot afford under-utilisation of labour anywhere. My hon. Friend and some of his colleagues are bringing a deputation to see me on Wednesday and I presume that this is one of the matters they want to discuss.

Employment, Croydon

Mr. Winnick: asked the Minister of Labour if he will make a statement on the employment position in the London Borough of Croydon arising from local firms transferring work to other places.

Mr. Fernyhough: Although three firms have recently transferred work elsewhere, of the 300 workers redundant in consequence 11 only remain unemployed. The percentage rate of unemployment for the Greater London area which includes Croydon is 1·6. This rate is below that for the region as a whole and considerably lower than the national average.

Mr. Winnick: I am grateful for that reply, but is my hon. Friend aware that there is still some concern locally about the number of firms which have either moved out or may do so in future? While we have plenty of offices, the same is not true of factories. Will he soon be replying to the letter from Croydon Council about the industrial future of the town?

Mr. Fernyhough: My hon. Friend can rest assured that, with its customary competence, my Department replies to every letter it receives. My hon. Friend says that factories are moving out. Our experience has shown that there is such a demand for industrial space in Croydon that premises vacated are usually swiftly taken by those who want to expand.

Mr. Frederic Harris: Is the hon. Gentleman aware that I am closely associated with a company situated in the constituency of the hon. Member for Croydon, South (Mr. Winnick) and that, whenever we unfortunately have vacancies, we find it extremely difficult to fill them? Is he further aware that there is no real unemployment problem in Croydon whatever?

Mr. Fernyhough: I hope that that happy situation will continue to prevail.

Earnings

Mr. Biffen: asked the Minister of Labour what has been the estimated increase in wage and salary rates and earnings for the latest available six-month period: and what is the expected increase during the coming six months.

Mr. Hattersley: During the period end-July, 1967, to end-January, 1968, there were increases of 4·1 per cent. in the weekly wage rate index, 4·2 per cent. in the hourly wage rate index and 4·0 per cent. in the index of average earnings, which covers both wage and salary earners. Estimates of future expectations are not published.

Mr. Biffen: Can the Joint Parliamentary Secretary confirm that these increases of 4 per cent. or so have occurred at a time when there exists statutory legislation to limit prices and incomes? Will he, therefore, reflect whether this does not show the inadvisability of such a policy which has so demonstrably failed?

Mr. Hattersley: No. I certainly do not accept that. Had the hon. Gentleman been less careful about the selection of the period for which he asks the figures, I do not think that the House would hold that view.

Mr. Barnett: On what does my hon. Friend base his estimate? What does he think would have been the rate of increase if there had not been the current wages legislation and what does he estimate the increase will be with and without the prospective legislation now being proposed?

Mr. Hattersley: As I was not giving an estimate in the first place, it is highly unlikely that I shall be prepared to answer that question which was dependent on an estimate having been given.

Mr. R. Carr: As the hon. Gentleman suggested that my hon. Friend the Member for Oswestry (Mr. Biffen) had been selective in his choice of period, is he not aware that the National Institute also expressed the opinion that the statutory policy had had no effect over the whole of its first 15 months of operation?

Mr. Hattersley: As the right hon. Gentleman is doubtful about my allegation, I should like him to consider some alternative figures. During the standstill, average earnings rose by 0·3 per cent. During the period of severe restraint, they rose by 1·9 per cent. In the six-month periods between and after those periods they rose by at least twice that amount.

Salary and Wage Claims

Mr. Biffen: asked the Minister of Labour what is the total number of workers covered by salary and wage claims, respectively, notified to his Department during the last 12 months; and what percentages they are of the total numbers of salary and wage earners, respectively.

Mr. Hattersley: Major claims notified cover 9·1 million wage earners and 1·4 million salary earners. These represent respectively, about 57 per cent. and 20 per cent. of the estimated totals.

Mr. Biffen: Does not that Answer illustrate the extremely partial knowledge available to the Ministry of Labour, which knows nearly three times as much about wage increases as about salary increases? As the statutory policy can proceed only on the knowledge available to the Ministry, does not this clearly indicate that wage earners are more likely to be discriminated against than are salary earners?

Mr. Hattersley: I have given the hon. Gentleman those figures because those are the figures of major claims notified. They are the figures for which we have definite totals, but in addition many others are informally notified to the headquarters of the Ministry and to regional offices. The majority of companies are applying a great deal of the incomes policy not because they have to notify figures to the Ministry of Labour, but because they know it to be in the national interest.

Mr. Heffer: Is is not clear that during the period of wage freeze executives' salaries went up—this was indicated in Business Week—and that there is discrimination against the worker at the shop bench as against the salary earner, particularly in the higher levels of income?

Mr. Hattersley: No, I do not think that that is a reasonable conclusion. Very often the suspicion that this discrimination exists arises from the knowledge that many administrative and clerical staff have annual increments, but annual increments are totally acceptable within the terms of the policy, given one or two qualifications.

Unemployment, Bideford

Mr. Peter Mills: asked the Minister of Labour (1) what steps he is taking to overcome the high and increasing level of unemployment in the Bideford area;
(2) what action he is taking to remedy the serious effects on unemployment caused by the breakdown in communications at Bideford.

Mr. Fernyhough: Between 8th January and 11th March, 1968, the number of people registered as unemployed at Bideford employment exchange increased from 436 to 485. I am not aware that any part of this increase was due to difficulties with road communications in Bideford. My local officers are doing all they can to help those who become unemployed to find suitable work and offer opportunities for training in suitable cases.

Mr. Mills: Is not this an appalling reflection on Socialist policies in this area? Will the hon. Gentleman do everything in his power to see that further industry is brought to the area and that the factory which M.P.J. recently vacated is soon filled?

Mr. Fernyhough: The hon. Gentleman will note that, as Bideford is in a development area, the present Government are doing more to attract industry to it and are offering better financial inducements than any previous Administration. I hope that, given time, he will find that this policy works to his entire satisfaction.

£15 Minimum Wage (Inquiry)

Mr. James Hamilton: asked the Minister of Labour if he will agree to participation by his Department in the inquiry into the £15 minimum wage being carried out by the Confederation of British Industries and the Trades Union Congress; and if he will make a statement.

Mr. Gunter: This is a matter which I understand has been raised in discussions which the C.B.I. and T.U.C. have had together but which has not involved any question of participation by my Department.

Mr. Hamilton: Does not my right hon. Friend agree that, with reasonable social security benefits, he is responsible for ensuring proper provision for men in the lower income groups and that his Department should, therefore, participate in discussions on a national minimum wage? Does he further agree that it is also in the interests of the Government to participate in this discussion because of the number of people employed by local authorities?

Mr. Gunter: I would rather see how far the C.B.I. and the T.U.C. get along the road. As my hon. Friend will know, it was only at a meeting on 4th March, just a fortnight ago, that these discussions were started. I would rather wait to see how far they go.

Mr. Shinwell: My right hon. Friend is saying on behalf of the Government that we ought to leave this matter of wage negotiations to the C.B.I. and the trade unions. On the other hand, the Government are ready to impose incomes legislation. Will he make a clear declaration whether in his opinion as Minister of Labour a wage of £15 a week is too high?

Mr. Gunter: I can immediately declare that a wage of £15 a week is not too high. However, my right hon. Friend is most diligent in his attendance at Question Time and must have heard me say more than once that the establishment of a minimum wage of £15 a week, or any other figure, requires the most detailed consultation and the most detailed analysis. The cost of establishing a minimum wage of £15 a week,


which the T.U.C. regards as desirable, in present circumstances is something which we cannot possibly afford. Therefore, discussions and consultations must proceed to see how we may best move towards that ideal.

Mr. Edward M. Taylor: Will the right hon. Gentleman carefully consider the views of his hon. Friend the Member for Bothwell (Mr. James Hamilton), remembering that many people get as much money for not working as they would for working?

Mr. Gunter: I take the point. I am not so sure that at some time we shall not have to have a look at what happens inside the Welfare State in this connection.

Dr. Summerskill: As the majority of low wage earners are women and as the Government are taking part in discussions with the T.U.C. and the C.B.I. about equal pay, could they not take part in discussions about a minimum wage of £15 a week?

Mr. Gunter: The two things are different and separate, and yet they are the two major problems at present. The cost of equal pay—interpreting equal pay as equal pay for equal work—is another substantial burden. That is one of the reasons why I would rather wait to see—I hope for not too long—how long the T.U.C. and the C.B.I. will take to reach some considered view on a minimum wage.

Agricultural, Horticultural and Forestry Industry Training Board

Mr. Farr: asked the Minister of Labour why there are no farmers from the East Midlands on the Agricultural, Horticultural and Forestry Industry Training Board; and if he will take steps to remedy the position.

Mr. Hattersley: There is such a farmer on the board.

Mr. Farr: I am grateful to the hon. Gentleman for correcting the erroneous impression which he gave me in a letter the other day. However, the fact remains that the East Midlands are not properly represented on this Board. Does he not agree that one of the troubles is that there are more union representatives than farmer representatives on the Board,

although farmers are solely responsible for financing the whole scheme?

Mr. Hattersley: No. The constitution of industrial training boards requires employers and employees to be represented equally. As for the correction which I gave to the hon. Gentleman, what I said in the House some time ago remains true and was not corrected by the letter. There is representation of the sort the hon. Gentleman wishes and I am sure that that is entirely proper.

Unemployment, Birmingham

Mr. Chapman: asked the Minister of Labour whether he is aware of the emergence of a persisting higher total of unemployment in Birmingham; and when he expects this total to fall to a more normal level.

Mr. Julius Silverman: asked the Minister of Labour if he will make a statement on the employment situation in Birmingham.

Mr. Fernyhough: On 11th March, 1968, the total number of persons registered as unemployed in the Birmingham Group of exchanges was 18,020–15,923 males and 2,097 females—of whom 3,144 were temporarily stopped. The percentage rate in March, 1968, fell to 2·6 compared with 2·9 in February, 1968.

Mr. Chapman: Does my hon. Friend confirm that this is now an unacceptable level of unemployment in Birmingham? If it persists over the coming two or three months, will he undertake to meet the Birmingham Trades Council to discuss it?

Mr. Fernyhough: It is unacceptable only if we are prepared to abandon what we are doing in the development areas. If a definite date can be arranged, I shall be happy to meet the Birmingham Trades Council. However, my hon. Friend will appreciate that if the economy continues to pick up as it now seems to be doing, that should be reflected in the employment position in Birmingham.

Mr. Silverman: While we accept, in broad terms, Government policy in this matter, may I ask whether my hon. Friend appreciates that the principle might be somewhat modified? Would he enter into consultations with the President of


the Board of Trade to consider the question of employment in this area, which is vital to the nation's economy?

Mr. Fernyhough: I accept that it is an area vital to the country's economy, but if one begins to modify area policy, where unemployment is almost double what it is in Birmingham, the whole of the Government policy would be fruitless.

Sir G. Nabarro: Has the hon. Gentleman not perceived that since last Tuesday employment prospects in Birmingham and adjoining areas have considerably worsened? Is it not a fact that the heaviest of all burdens in the Budget fell upon the motor car industry, the principal employer of labour in the Birmingham conurbation?

Mr. Fernyhough: It is true that some burden fell upon the motor car industry—[Interruption.] I attended the Budget debate and rather gathered that hon. Members opposite felt that the heaviest burden came in relation to the wealth tax. I may be wrong. Hon. Members will be aware that the motor car industry is now engaged on a great drive for exports. This is where we want the growth to take place. This is where we hope we can create additional employment.

Mr. John Page: In view of the great influences of the motor industry on engineering employment in general, and Birmingham in particular, and the savage attack made in the Budget, will the Minister of Labour keep a very close eye on this, to see that unemployment in the Birmingham area does not get out of control? Is he aware that it could have a wide effect on other industries too?

Mr. Fernyhough: If that prophecy came true it would be our duty to look at the position again.

Mr. Victor Yates: asked the Minister of Labour how many men and women at present unemployed in Birmingham have been unemployed for more than one month, two months, and three months, respectively.

Mr. Fernyhongh: The latest date for which a comprehensive duration analysis of the registered wholly unemployed is available is 8th January, 1968. On that

date, in the area covered by Birmingham, Aston, Handsworth, Selly Oak, Small Heath and Washwood Heath Employment Exchanges, 9,876 men and 1,383 women had been on the registers for more than four weeks, 7,595 men and 1,004 women for more than eight weeks and 5,719 men and 672 women for more than 13 weeks.

Mr. Yates: Does the Minister realise that this increasing number of persons unemployed for more than three months is extremely serious? Will he consider with the President of the Board of Trade whether they are forcing too many factories to move, leaving skilled workers behind?

Mr. Fernyhough: I accept that all unemployment is very undesirable and hurtful. Hon. Members have to face the fact that if we are to deal with the problems of Scotland, Wales, the South-West and the North-East we can do so only on the basis of pursuing the present policy until we achieve the desired end.

Mr. R. Carr: Is the hon. Gentleman telling the House that the Government's policy for curing unemployment in the development areas is to create it elsewhere?

Mr. Fernyhough: Of course not. What I am telling hon. Gentlemen opposite is that it is the duty of any Government with any understanding of the national need to see that there is a far better distribution of—

Sir G. Nabarro: Misery—

Mr. Fernyhough: —unemployment in future than there has been. No Government can defend the over-heating that occurred in the South-East and the mass unemployment in the areas I have mentioned in the post-war years.

Mr. Christopher Price: asked the Minister of Labour what was the total number unemployed in March, 1964, 1965, 1966, 1967 and 1968 in the City of Birmingham.

Mr. Fernyhough: In the area covered by the Birmingham, Aston, Handsworth, Selly Oak, Small Heath and Washwood Heath employment exchanges, the total numbers registered as unemployed at March, 1964, 1965, 1966, 1967 and 1968 were 7,210, 9,210, 3,980, 16,900 and 18,020 respectively.

Mr. Price: Would not my hon. Friend agree that those figures show that Birmingham can no longer be regarded, as it has always been regarded, as a rather lush area for employment? I accept the need for the Department to develop its development area policies, but will my hon. Friend pay particular attention in future to the problems of Birmingham, bearing in mind the increase which he has just announced?

Mr. Fernyhough: The increase is reduced on a percentage basis to 2·2 per cent. if we leave out those temporarily stopped, many of whom arise from industrial disputes. When there are areas which have an average three or four times greater than 2·2 per cent, I do not think that it would be a fair solution or economic policy to give any preference to Birmingham.

Sir G. Nabarro: Do not these figures give ample justification for my earlier prognosis that the position in Birmingham is steadily and progressively getting worse and will, as a result of last Tuesday's Budget, be made infinitely worse?

Mr. Fernyhough: I am sure that time will prove that that prophecy, like many other prophecies which the hon. Gentleman has made, was completely wrong.

Mr. Victor Yates: It is nothing to do with the Budget—

Sir G. Nabarro: Of course it is.

Mr. Yates: —but would my hon. Friend realise that there are thousands of small factories in Birmingham, many of which are being asked to move out, and it is in these where skilled workers will be made redundant? This is causing considerable difficulty. I hope that this aspect will be thoroughly examined.

Mr. Fernyhough: I do not think there is any Government pressure on firms to move out. It is a voluntary decision made by the firm. But there is substantial diversification in Birmingham. I am sure that the growing economic activity will reflect itself in the employment position in Birmingham, as it will in the rest of the country.

Telecommunications Equipment (Manufacture)

Mr. Urwin: asked the Minister of Labour what estimate he has made of the number of people engaged in the

manufacture of telecommunications equipment; how many are employed in the development areas; and what is the proportion in the Northern Region.

Mr. Gunter: The industry generally recognised to be most concerned with the manufacture of telecommunications equipment is "Telegraph and Telephone Apparatus" (Minimum List Heading 363 of the Standard Industrial Classification).
It is estimated that at mid-1967 there were 95,300 employees in employment in this industry in Great Britain as a whole, and that of these 13,400–14 per cent.—were in the Northern Region.
Estimates for 1967 for the Development Areas are not yet available. In 1966 all Development Areas had 35 per cent. and Northern Region 14 per cent. of the total numbers in Great Britain.

Mr. Urwin: While I am deeply grateful to my right hon. Friend for that information, may I ask if he will accept that we on this side of the House believe that the number employed in this industry in the Northern Region is far too low, especially when one has the situation of a heavy decline in basic industries? Would he agree that 2·6 per cent. unemployment somewhere else in the country, however unacceptable, is not by any means comparable with almost 10 per cent. amongst men, in Sunderland?

Mr. Gunter: I certainly take the latter point, but I should have thought that 14 per cent. in the Northern Region is not really a very bad percentage.

Retail Price Index

Mr. Gardner: asked the Minister of Labour what changes he proposes to make in the methods of obtaining the information on which the Retail Price Index is based.

Mr. Gunter: The methods used for obtaining information are kept under review and changed when necessary, but I have no changes in mind at the present time.

Mr. Gardner: Is the Minister aware that the figures given in the Index of Retail Prices are increasingly treated with scepticism?

Mr. Speaker: Order. The hon. Member must speak up.

Mr. Gardner: In view of the rapidly changing position in shopping and retail distribution, does he not think that some more sophisticated methods are needed? Has he consulted the Social Survey on this?

Mr. Gunter: Yes, and there is a continuing review of this taking place examining how statistics are arrived at. I am not entirely happy at the weighting given to certain elements in the Retail Price Index. I am giving more details, in answer to a later Question, of the criticisms in the Consumer Council magazine, "Focus" which had something to say about this some months ago.

Training Facilities, West Midlands

Mr. Christopher Price: asked the Minister of Labour what steps he is taking to extend facilities for retraining in the West Midlands in the light of the recent figures for adult male unemployment in Birmingham.

Mr. Hattersley: Two new Government training centres are to be set up in the West Midlands, one in North Staffordshire by the end of 1969, and the other in the Wolverhampton area by the end of 1970. The number of training places at the present Birmingham and Coventry centres is to be increased by mid-1969. These developments will raise the annual output of trained men from centres in the West Midlands from 600 to about 1,350.

Mr. Price: While thanking my hon. Friend for that reply, and accepting that some unemployment in the Birmingham area is the result of the more efficient use of manpower in the motor industry, for which the Government can take credit, may I ask him whether he does not consider that there is a greater duty upon the Government to increase training facilities to cope with that increase?

Mr. Hattersley: The basic redeployment which has gone on successfully in the West Midlands requires increased training. Much of this must be done within the factories in which the re deployed men are to work. This is being facilitated by the excellent progress being made by the Engineering Industry Training Board.

Mineworkers (Durham, Northumberland and Cumberland)

Mr. Shinwell: asked the Minister of Labour if he will state the number of Mineworkers registered at employment exchanges in Durham, Northumberland and Cumberland, respectively.

Mr. Fernyhough: At 11th March, 1968, the numbers of persons registered as unemployed in Durham, Northumberland and Cumberland who last worked in the coalmining industry were 3,580, 1,060 and 120 respectively.

Mr. Shinwell: On the assumption that the majority of these men can be regarded as redundant, what is to become of them? There is nothing personal about this, but, in his reply, will my hon. Friend disregard all the jargon about advance factories and hopes for the future?

Mr. Fernyhough: Several major industries have declared since January that they are going to the North-East, in particular, and we are designating as special development areas those areas in which mines have been closed. If my right hon. Friend believes that that is jargon, then may I say that I do not believe that any Government, even the Government of which he was a member, did more for the areas which require additional employment than this one.

Industrial Training Boards (Apprenticeship System)

Mr. Kenneth Lewis: asked the Minister of Labour what guidance he intends to give industrial training boards on the need for changes in the apprenticeship system.

Mr. Hattersley: Many of the boards are making progress in establishing training requirements for craft occupations. General guidance was given to them in the Central Training Council's memorandum No. 5, published in April, 1966, and the Council is currently considering the further development of policy for skilled training.

Mr. Lewis: Since there is a need for increased training, and a need to reduce the years worked towards an apprenticeship, will the boards try to influence the


reduction of the number of years spent on apprenticeship?

Mr. Hattersley: The boards' task is to give guidance on the years taken over apprenticeship rather than positively to influence the decision, which in many ways is the concern of industrial relations procedures. But the hon. Gentleman will be comforted, as I am comforted, to know that some boards have already done this, not least the Foundry Industry Training Committee which advised that apprenticeship training in that industry should last for three and not five years.

Mr. Heffer: Is not one of the problems that some employers find it difficult to agree to pay the full cost of the rate in the last year, which is creating a problem in relation to a reduction in the number of years?

Mr. Hattersley: This is a problem in some industries, and that is why there are important issues of industrial relations to be decided as well as the more technical issue of for how long the apprenticeship period should last.

Mr. Scott: Should not we be moving away completely from the idea of a prolonged period of training? Is not intermittent training more in line with the needs of a modern economy? Should not the Ministry give a much stronger lead in this matter?

Mr. Hattersley: If the hon. Gentleman means, should not we accept that skilled men will be required to retrain and refurbish their skills during their working lives, that is the case. This is why we particularly welcome the initiatives of the Engineering Board, whose apprenticeship schemes are based on a module system of training which makes adult life a good deal easier than was the case under the old-fashioned schemes of training.

Office Employees

Mr. Blaker: asked the Minister of Labour if he will make a statement about the studies made in his Department of the increase in the number of office employees in recent years.

Mr. Gunter: A report of the Manpower Research Unit was published on

11th March, 1968, under the title "Manpower Studies No. 7: Growth of Office Employment". This examines growth over the period 1921 to 1961, and is the first part of a study to try to identify the reasons for the large increase in office employment and to forecast future developments.

Mr. Blaker: Is the right hon. Gentleman aware that the report to which he has referred contains no comparison between the trend in this country and the trend in other advanced industrial countries? In the further studies which are to take place, would it not be useful if that comparison were made?

Mr. Gunter: I understand that that is very much in mind for the second part.

Engineering Industry

Mr. Blaker: asked the Minister of Labour what was the total reduction in the numbers employed in the engineering industry during 1967.

Mr. Hattersley: In the engineering and electrical goods industries (Order VI of the Standard Industrial Classification), it is provisionally estimated that between December, 1966, and December, 1967, the numbers decreased by 38,000.

Mr. Blaker: Is not that a very sad reflection of the Government's mismanagement of the economy, bearing in mind the stimulation which they are allegedly giving to manufacturing industries at such great cost to the taxpayer?

Mr. Hattersley: Question No. 37 asks for a general conclusion about that stimulation. If the hon. Gentleman waits until then, I will be glad to comment on the matter.

Engineering Industry Training Board

Mr. John Wells: asked the Minister of Labour whether he will investigate the possibility of dividing the Engineering Industry Training Board into a number of smaller boards.

Mr. Hattersley: No, Sir, but we will continue to keep the scope of the board under review.

Mr. Wells: But is the hon. Gentleman aware that certain sections of the engineering industry, such as welding, are virtually completely separate industries and that it is absurd that there should be a general training board when there are these virtually separate industries within the industry?

Mr. Hattersley: I know that there are areas of the industry covered by the Engineering Industry Training Board which are very different from the majority of the occupations which it covers, but there are substantial advantages in having them under one board. If the board thinks that it is necessary to make special provision for part of its concern, it is entitled to do so.

Training Boards (Staff)

Mr. Farr: asked the Minister of Labour what is the total number of all staff, including office employees and instructors, employed at the latest available date by the various training boards which have been established under the Industrial Training Act, 1964.

Mr. Hattersley: This is a matter for the boards themselves, which are given express responsibility under the Industrial Training Act for appointing their own staffs.

Mr. Farr: On a point of order. Did the hon. Gentleman answer my Question? I asked for the total number of staff. He seemed to refer to something entirely different.

Mr. Hattersley: I said that that was a matter for the boards themselves.

Mr. Farr: Surely the Minister has some idea of the total staff involved. A number of hon. Members are very concerned at the growing staff structure of the individual training boards. Some picture of the exact size would have been useful. Is the hon. Gentleman aware that no less than £500,000 annually is to be devoted to running the Agricultural Training Board?

Mr. Hattersley: I am well aware of the very special considerations which apply to the Agricultural Training Board this year. In no other year has that board had to spend substantial sums on administration and staff. But that is

typical neither of the boards in general nor of the work which that board intends to do in the long run. The position concerning my responsibility is very clear. Schedule 10 to the Act enables the boards to set up their own machinery. It is vitally important that they should be allowed to get on with the work—the running of the board by industry, for industry—without the constant interference of my Ministry.

Manufacturing Industry

Sir J. Gilmour: asked the Minister of Labour the total reduction in numbers employed in manufacturing industry during 1967.

Mr. Hattersley: It is provisionally estimated that between December, 1966, and December, 1967, the numbers decreased by 220,000.

Sir J. Gilmour: Do not those figures illustrate that there is very much more scope for replacing manpower in manufacturing industry than in service industries and that, therefore the Selective Employment Tax would be more suitable for an Alice-in-Wonderland economy than our own in present circumstances?

Mr. Hattersley: As I understand the hon. Gentleman's question, it implies that the intention of S.E.T. to move employees from the service trades is, in fact, operating. I know that it is operating. I am sure that it is right that it should operate and that it will be for the benefit of the economy that it is operating.

Mr. R. Carr: If it is operating, why did the Government remove the premium to manufacturing industry, which was supposed to be the mechanism to make it operate?

Mr. Hattersley: There are two reasons. First, it is operating irrespective of premium and it looks like continuing to operate, simply consisting of refund and the payments. The second reason is that outlined, as I told the right hon. Gentleman five weeks ago, by the former Chancellor of the Exchequer, who explained to the House that in some ways the premium was operating too well.

Mr. Maudling: Has the Minister any evidence to show the results of the process, which he claims, that gross domestic product is rising?

Mr. Hattersley: I do not think that the answer to that question is necessarily relevant to the effects of the S.E.T. I certainly think that if the right hon. Gentleman looks at the gross domestic product and its improvement over the next three years, he will see that the improvements therein are the result of the general restructuring of industry, of which S.E.T. is a part.

Mr. J. T. Price: Is my right hon. Friend aware, however, that when he Maims that S.E.T. has encouraged the transfer of labour from the distributive trades to manufacturing industry, there is no evidence in my possession or in the possession of my trade union, which is the principal union in the distributive trades, that any such thing has taken place?

Mr. Hattersley: I can only ask my hon. Friend, and, indeed, the House, to read what will now be the Written Answer to Question No. 37, which goes into some detail about how that process can be seen to have come about over the last 18 months.

Productivity Agreements

Mr. Kenneth Lewis: asked the Minister of Labour how many staff in his Department are fully engaged in assisting industry to increase productivity agreements.

Mr. Gunter: Twenty officials of my Ministry are fully employed and a larger number spend a substantial part of their time on the work of assisting industry to conclude productivity agreements.

Mr. Lewis: Does not the Minister agree that if he is to look at a massive number of new productivity agreements over and above the 3½ per cent. norm, he will have to apply hundreds more staff to do it? Is it not better to leave it to industry to work out productivity agreements and, if those in industry get into any difficulties, for them to come to him so that he can help them in their difficulties?

Mr. Gunter: The trouble is that when people have got into the difficulties and signed the agreement, it is all over; there is not much chance then of rectifying a situation. How many productivity agreements will emerge, I do not know. So

far, we have not done badly with the staff involved. About 903 productivity agreements have been before the experts during the last 15 months and about 85 of them have been rejected.

Training Facilities (South-East London)

Mr. Moyle: asked the Minister of Labour what extra training facilities he now intends to provide in South-East London for 6,000 Associated Electrical Industries' employees who will have to seek alternative employment as a result of the recent closures announced in the area.

Mr. Hattersley: Experience suggests that many of the redundant A.E.I. workers will not require retraining before taking other jobs. Where retraining at the operator level is required, this can usually best be given by the new firm. Redundant workers who need the accelerated training for skill given by Government training centres will be able to obtain it at the Medway and Poplar centres, which together have some 500 training places and will have nearly 700 by the end of the year. As the House has already been informed, a further centre is also proposed for South-East London, though the precise site has not yet been settled.

Mr. Moyle: Will my hon. Friend bear in mind the danger of complacency when regarding this problem? Is he aware that many of the employees concerned are long-service employees who will have to face employment in alternative industries and, therefore, require retraining? Will he promise to keep the situation under careful review?

Mr. Hattersley: I can give my hon. Friend that assurance and the assurance that there is no complacency in my Ministry in this regard. There is simply some satisfaction that the training facilities are available should they be needed.

Cost of Living Index

Mr. Wingfield Digby: asked the Minister of Labour what plans he has for revising the Cost of Living Index; and what extra items are to be included.

Mr. Gunter: As I announced on 11th March in reply to a Question by my hon.


Friend the Member for Cardigan (Mr. Elystan Morgan), I have accepted an interim report of the Cost of Living Advisory Committee recommending that meals bought and consumed outside the home should be included among the price indicators used in the Index of Retail Prices from February, 190.—[Vol. 760, c. 204]

Mr. Digby: As there has not been a wholesale inquiry since 1962, is there not a case for going into other items also, particularly transport items? At a time like this, is it not important that the public should have confidence in the index?

Mr. Gunter: The hon. Member knows very well that the items which are used as indicators in the Cost of Living Index are constantly under review. If he has any particular items or details in mind, I am certain that his advice would be welcomed.

Unemployment, Clacton-on-Sea

Mr. Ridsdale: asked the Minister of Labour the percentage of unemployed in Clacton-on-Sea in the last three months, respectively; and how this compares with the previous three years.

Mr. Fernyhough: As the reply consists of a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Ridsdale: Is the Minister frightened to say that the rate of unemployment in Clacton in February was 6·6 per cent.? Is not this a dangerously high figure and a disquieting trend? Does he really think that we should pay S.E.T. in such areas?

Mr. Fernyhough: The hon. Gentleman must have got his figure from a different source from mine. In February, according to our records, the figure was 6·2 per cent. This month it is 5·7 per cent. It must, however, be remembered that one-third of that figure comprises people over the age of 60, many of whom have retired and are on superannuation pensions.

Following is the information:


PERCENTAGE RATES OF UNEMPLOYMENT IN THE AREA COVERED BY THE CLACTON-ON-SEA EMPLOYMENT EXCHANGE



January
February
March


1968
6·1
6·2
5·7


1967
6·4
6·0
5·3


1966
3·6
3·5
2·9


1965
4·0
3·9
3·6

Equal Pay

Mr. Bob Brown: asked the Minister of Labour if he will make a statement on progress of discussions on the subject of equal pay in the context of Human Rights Year and the 50th anniversary of votes for women.

Mr. Hattersley: I would refer my hon. Friend to my reply to my hon. Friend the Member for Blyth (Mr. Milne) on 11th March, 1968.—[Vol. 760, c. 971–3.]

Mr. Brown: Would my hon. Friend agree that 50 years after having received the vote, our womenfolk are still second-class citizens in industry? Does he not consider that as a first step we should at least give immediate consideration this year and next year to women having equal rights in industry with their male counterparts?

Mr. Hattersley: I certainly would not agree that women are invariably second-class citizens in industry. Those who might be so described are in that position for a variety of reasons, not all of which are the responsibility of my Ministry and of my right hon. Friend the Minister. I agree, however, that immediate consideration should be given to this problem. That was why I was happy to announce earlier in the year that the C.B.I. and the T.U.C. had been consulted and were making decisions about how the next step could, and should, be taken.

Dame Irene Ward: When does the Minister think that he will be able to announce some progress in this matter? It is no good keeping on answering questions about conferences and the like if we never get an answer about whether progress is being made.

Mr. Hattersley: I am advised that the T.U.C. and the C.B.I. are making progress in the difficult decisions which they have to take concerning scope, definition and cost. I am sure that the hon. Lady agrees that in embarking on this large and expensive project, it is essential that the important groundwork should be done well. It would be quite wrong of me to urge the C.B.I. and the T.U.C. to move at a speed which would result in the wrong decisions being taken.

Dr. Summerskill: Would not my hon. Friend agree that the difficulties in introducing fair and just legislation to give women the rate for the job are not nearly as great as those facing the Government in introducing wage restraint which they intend to do in the near future?

Mr. Hattersley: I make no comment about the comparative difficulty since I regard this as something on which no precise calculation can be made. My hon. Friend should, however, understand that there is one way in which the legislation on wage control, as she describes it, differs fundamentally from the legislation for equal pay, and that it is that it will cost the country and industry a very great deal of money indeed.

Private Pension Schemes (Transferability)

Mr. Worsley: asked the Minister of Labour what proposals he has for improving transferability between private pension schemes.

Mr. Gunter: This matter is under consideration but cannot be decided in advance of the review, which is at present being carried out, of the State social security scheme.

Mr. Worsley: With respect to the right hon. Gentleman, would it not be better if consideration of these matters were transferred to the Department of his right hon. Friend the Minister of Social Security, so that all pension matters could be considered together?

Mr. Gunter: The hon. Member will, I am sure, know that the closest cooperation takes place between the two Departments on this matter. I do not think that that is the problem. As I have explained to the House before, this question is so complicated and so complex because of the vast number of different pension schemes in industry that it is difficult to arrive at proper conclusions about them.

AER LINGUS VISCOUNT AIRCRAFT (ACCIDENT)

Mr. Corfield: (by Private Notice)asked the Secretary of State for Defence if he will make a statement about the search for the Aer Lingus Viscount EL 1712

which was due at Heathrow at 12.48 yesterday and which has been reported missing.

The Under-Secretary of State for Defence for the Royal Air Force (Mr. Merlyn Rees): I am sure I am expressing the feelings of the whole House when I extend my deepest sympathy to the relatives of all the victims of this tragic accident.
The Viscount's last radio message indicating that it was in difficulties was received at midday yesterday by the Air Traffic Control Centre Uxbridge, who immediately warned the responsible Rescue Co-ordination Centre, No. 19 Group, Coastal Command, at Plymouth. Confirmation that radio contact with the aircraft had been lost was received by the Rescue Co-ordination Centre at 12.12.
Two helicopters took off from the Royal Naval Air Station Brawdy at 12.56 p.m. to search the area where it was presumed the Viscount had been lost. A Shackleton from Ballykelly was airborne about the same time and searched the area continuously from about 2 p.m. A Shackleton from Kinloss was airborne at 1.47 p.m. and was on task from about 3.45 p.m. to about 11.15 p.m. In addition a Canberra flew a two hour search sortie from St. Mawgan at 1.20 p.m. Two Gannets took off from Brawdy about 5 p.m. These Gannets, together with the R.N. helicopters from Brawdy and R.A.F. helicopters, which had been detached from Chivenor, flew a total of some eight hours on the search.
Additional Shackletons from Ballykelly and Kinloss continued the search throughout the night and during today. Since first light this morning Gannets from Brawdy have also resumed their search.
Apart from the aircraft search four of Her Majesty's ships have been engaged in the search. These were the two frigates "Penelope" and "Hardy", which were already in the area, the air sea rescue vessel "Invermoriston", and the coastal vessel "Uplifter". There has been full co-operation throughout with the Irish authorities.
The latest news I have is that some wreckage was sighted at 12.20 p.m. today by a Shackleton of No. 206 Squadron Kinloss off the coast of Ireland in an


area centred upon 52.15 N. and 06.06 W. and that H.M.S. "Hardy" has recovered three bodies. Irish helicopters, 3 Irish lifeboats, 2 trawlers and the "Penelope", "Hardy" and "Invermoriston" are converging on the scene. An R.A.F. Shackleton is circling the area.
I would like to add that the times I have given here have been obtained hurriedly. As I hope the House will appreciate, all those concerned have been engaged in the rescue operations and there has not yet been time for detailed cross-checking.

Mr. Corfield: May I thank the hon. Gentleman for that detailed reply and, on behalf of my hon. and right hon. Friends, join with him in the sympathy which he has expressed? May I also express the admiration of this side of the House at the promptitude with which the Services rallied at this call for help?

BUSMEN AND ROAD HAULAGE WORKERS, LIVERPOOL (STRIKE)

Mr. Tilney: (by Private Notice)asked the Minister of Labour, what steps he is taking following the telegrams sent to him on 21st March by the Merseyside Chamber of Commerce to end the unofficial strikes on Merseyside of approximately 10,000 bus drivers and transport drivers which are gravely affecting the life and livelihood of the people in the area, and what steps he has taken to safeguard essential services.

The Minister of Labour (Mr. R. J. Gunter): Liverpool Corporation busmen have been on strike since 11th March and there has been a strike of road haulage workers in the area since 18th March. As a result, inconvenience has been caused to the travelling public; there have been difficulties in the distribution of certain foodstuffs; the flow of goods to and from the docks is being affected; and there has been some interruption of supplies to industry.
Both strikes are unofficial and the unions concerned have urged the men to return to work.
The House will be aware that the latest pay settlement covering Liverpool busmen has been referred to the Prices and

Incomes Board. In the case of the road haulage strike, there have been local discussions between the employers and the union, and I understand that at the national level the unions are having meetings in the near future with British Road Services and also with the Road Haulage Association.
In the circumstances, it would not be appropriate for me to attempt to intervene between the two sides in either of these disputes. I would, however, urge the men on strike to follow the advice of their unions and return to work. My Department is in close touch with the unions and the employers' organisations concerned and I will, of course, continue to watch the situation carefully. The House may be assured that the Government will take action to safeguard essential supplies and services, should that become necessary.

Mr. Tilney: May I ask the Minister three questions? Following his appeal to the unofficial strikers to return to work, could he say what chance there is of any productivity agreement with them? Secondly, what discussions has he had with the main union concerned and with others about reported threats of violence to non-strikers? Thirdly, whether he is satisfied that other commodities needed by the public on Merseyside will not go the way of sugar and be unobtainable?

Mr. Gunter: On the middle part of that question, may I say immediately that I have no knowledge of threats of this kind. I have no doubt that harsh words are being said, but there has been nothing official said to me about it. On the question of other commodities, I have already said that we shall be keeping a very close watch and any necessary action will be taken if the need arises. I do not think it has quite arisen yet, and I hope the hon. Gentleman will agree with me. On the question of productivity, they have the chance now to sit down and start to talk about productivity, and that is what the unions are telling them they ought to do and I hope they will do it.

Mr. Heffer: In view of the fact that the bus drivers' strike originally arose out of their claim going to the Prices and Incomes Board, could my right hon. Friend indicate whether some pressure could be applied to Mr. Aubrey


Jones and his Board to get an early decision in relation to this particular claim? Secondly, could my right hon. Friend not reconsider the proposition which have put to him already of sending someone of the calibre of Sir Jack Scamp to Merseyside immediately to get some sort of investigation and inquiry into the whole position of industrial problems on Merseyside?

Mr. Gunter: In the first place, I have an assurance from the Chairman of the Prices and Incomes Board that this matter is receiving most urgent attention and he will submit his report as early as possible. On the question of sending somebody there, what I am being asked to do is in effect to conciliate or have another inquiry. How can I conciliate in an unofficial strike of this character, and how can I have another inquiry when is has been referred to the Prices and Incomes Board? I think it could only end in complete confusion.

Mr. R. Carr: Does not this serious strike i n breach of agreement underline yet once again how important it is that agreements should be made binding in this country as they are in every other industrial country, except Britain?

Mr. Gunter: I am not sure whether the hon. Member is stating exactly Opposition policy. If so, that is all right with me. But there is an honest difference of opinion amongst Conservative lawyers and among Labour lawyers and a lot of other lawyers whether in the end we can make collective agreements binding.

Mr. Selwyn Lloyd: To return to the question of essential supplies, is the Minister aware that there was a really grave shortage of sugar on Merseyside this weekend, and that there is talk of a threat to fuel oil supplies? Will he really move quickly in these matters?

Mr. Gunter: I can tell the right hon. and learned Gentleman that I understand there is a report awaiting me

at the Ministry of what has happened today.

Mr. Fortescue: Would the Minister completely agree that the busmen's strike, which started and is taking place through consideration of their claim by the Prices and Incomes Board, is direct evidence of the ineffectiveness of the Government's incomes policy?

Mr. Gunter: If the hon. Member is saying that a policy is ineffective because men challenge it by unofficial action, I think he is barking up the wrong tree.

Mr. Fletcher-Cooke: Is the right hon. Gentleman aware that the effects of the transport drivers' strike go far beyond Merseyside and that supplies of sugar and other foodstuffs are very short in the whole of Lancashire?

Mr. Gunter: Yes, I have had reports this morning to that effect.

QUESTIONS TO MINISTERS

Mr. Farr: On a point of order, Mr. Speaker. May I refer you to a matter relating to Question No. 40, which I asked of the Minister of Labour a moment ago? When I asked him that Question, the reply which I received was that the answer was a matter for the boards themselves. May I raise two points with you, Mr. Speaker? First of all, is it or is it not within the rights of an hon. Member of this House to ask manpower Questions relating to the training boards? Secondly, is it not necessary for the Minister to provide the relevant information when it is sought by a back-bench hon. Member?

Mr. Speaker: The hon. Gentleman has been in the House long enough to know that Mr. Speaker has no power to compel a Minister to answer in the way that an hon. Member wants him to. It is not unknown for hon. Members to be disappointed by Ministers' replies.

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [19th March],

AMENDMENT OF THE LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that, without prejudice to any authorisation by virtue of any Resolution relating to purchase tax or selective employment tax, this Resolution does not extend to the making of amendments of the enactments relating to either of those taxes so as to give relief from tax.

Question again proposed.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.41 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): Mr. Speaker, we are starting on the last day of a four-day debate on my right hon. Friend's Budget. Certainly on this side of the House it was received with a warmth of feeling and depth of understanding which was both a tribute to my right hon. Friend's mastery of the lucid phrase and a recognition of the fact that the underlying thought sprang from a common philosophy and from a determination to serve a common purpose.
The enthusiasm of Budget day inevitably gives way to objective assessment, and it seems clear that informed opinion, both inside and outside the House, has concluded that my right hon. Friend is right on the Budget's two most important aspects. I refer to the overall size of the Budget and to the fairness of its proposals. Judged by the experience of previous years, the size is very great. Judged by previously accepted philosophy, the proposals are unexpected. It is, therefore, worthwhile examining the reasons why these two major propositions have received such widespread acceptance.
The Budget takes place after a year of markedly deteriorating balance of payments. Once again, we are not paying our way as a nation. The improvement in our standard of living has been obtained partly through our own

exertions but partly through running up bills abroad. I myself find it intolerable to contemplate the fact that, in contrast with the situation which existed only a comparatively short time ago when, by our own exertions, the nation played an outstanding part in maintaining the liberty of the western world, we should now be maintaining our standard of living by relying, at all events partly, on the exertions of others.
What I find equally intolerable is to be unable to escape the conclusion that, as a nation, we have been eating our seed corn. Of course it is not expressed in those terms. We are told that the way to growth in the economy is greater investment and that we have been consuming too great a proportion of our gross national product, leaving too small a proportion for adding to investment. But I prefer the homely phrase which sometimes enshrines the home truth; and the truth is that if you eat your seed corn you deny yourself the possibility of a bigger crop next year and the year after.
The size of the Budget is the measure of the Chancellor's determination that increasingly we shall move into a position where we are again living within our means, putting something by towards the settlement of those bills, and saving more of our seed corn. I am sure that it is the deep desire of all of us that, as a nation, we should be seen to be putting our house in order; and that desire has led to the full acceptance of the size of the Budget.
The position a year ago was so different that it is necessary to remind the House that at the beginning of 1967 we were in surplus. It was against that background of a marked improvement in our balance of payments that the Budget proposals of my right hon. Friend the Home Secretary were justified. His Budget judgment was right then, just as my right hon. Friend the Chancellor's judgment is right now; and the right hon. Member for Barnet (Mr. Maudling) said at that very time, during the course of the Budget speech last April, that he, too, thought that a broadly neutral Budget was correct.
Just as the size of the Budget has been accepted as being broadly right, so have the proposals as being broadly fair; and


by that phrase I think we all mean that the biggest burden of taxation is being put upon the broadest shoulders. I am happy to inform the House that this commonsense approach is fully justified by the figures, which show that the measures as a whole are progressive in the sense that the net additional payments will form a larger proportion of the incomes of families with high incomes than of families with low incomes. I have looked at the effects of all the Budget measures on families of varying income levels, and at the total effect; and it is clear that, notwithstanding that the Budget increases indirect taxes, including S.E.T., by nearly £600 million in a full year, my right hon. Friend has contrived to leave the poorer section of the community better off than the richer as compared with the pre-Budget situation. That is surely what we ought all to desire. One of the purposes of a Budget is to redistribute income and this Budget does just that.
The House will not want me to leave the matter there, however. It will want to be satisfied that we have succeeded in protecting the poorest sections of the community against the effects both of devaluation and of the Budget proposals.
As my right hon. Friend made clear in his Budget speech, he decided that he had to budget for a cut-back of about 2 per cent. a year in consumption: a cutback, that is, from the 1 per cent. rise which would have been likely without budgetary action. But the 2 per cent. reduction caused by the Budget proposals does not fall evenly on differently placed families, as I have already indicated. The progressive effect of the proposals is to leave poorer families no worse off than now and the poorest families better off. We should not and we are not asking them to share even in the very minimal sacrifice which is represented by a 1 per cent. reduction in the level of consumption. It goes without saying that, at the other end of the scale, the impact of the Budget changes will be correspondingly greater. Indeed, had we not provided that protection we would not, in my view, he justified in bringing forward proposals for a prices and incomes policy of the kind we have done: not only in the field of prices and wages, but also of dividends.

Mr. James Dickens: While I have the greatest respect for my

right hon. Friend, he is making a number of remarkable assertions. May I ask him if he can produce documentary evidence to support the view, which runs completely counter to the article in the February issue of Economic Trends, that the burden of indirect taxation on families with incomes below £900 a year has a higher incidence than on those above—

Mr. Speaker: Order. An intervention cannot be a Budget speech.

Mr. J. Bruce-Gardyne: On a point of order, Mr. Speaker. Is it possible to do something about the loudspeakers? They are now coming on and going off, which makes matters even worse than before.

Mr. Speaker: The Chair is painfully aware of all that is happening. Everything is being done by the engineers to correct the fault. At the moment, improvements come in dramatically and then disappear. I am sure that, sooner or later, things will straighten out again.

Mr. Diamond: I heard very clearly what my hon. Friend put to me. I have read the tables, not only those that he quoted, but all the tables in Economic Trends. They support part of my statement. However, I am bringing the matter up to date. Those tables refer to 1965 and 1966. What the House would want to know was whether the general common sense approach of everyone that this Budget was fair was justified by a close examination of the figures. I have attempted to do that. I have had such assistance as has been available, and I have examined the figures carefully. That is the conclusion I have reached. I have not the slightest hesitation in putting all the information at my disposal before my hon. Friend and discussing his view and the conclusions to be drawn.
I turn now to the question of dividend restraint, and I want to report the present position to the House. First, I would like to give the figures, so that the discussion may proceed on a secure basis of fact. The increase in wages last year amounted to 6 per cent. Dividends suffered a fall of 1 per cent. It is against this background that we are proposing a policy for dividend restraint to match our wages policy. These are certainly not on all fours with one another, but there


is no doubt that those who are affected by wage restraint policies would feel a sense of grave injustice if there were no comparable dividend restraint policy.
Quite apart from the broad justification in equity, it is also the case that great economic benefit will flow from a reduction in consumption, whether that consumption derives from salaries, from wages, or from dividend income. Dividend restraint must also mean that in certain cases larger profits will be retained than would otherwise be the case and larger reserves will, therefore, be available for ploughing back, for investment, and for encouraging future growth.
For all these reasons, we have decided to restrict the increase in dividends of quoted companies to 3½ per cent, as compared with last year. Indeed, we are requesting companies not to increase their dividend at all, unless they feel compelled to do so.

Mr. Russell Kerr: Would my right hon. Friend allow me?

Mr. Diamond: I should be glad to give way as soon as I have reached the end of this section dealing with dividend restraint, because it is highly probable that I shall, within a very short time, answer the question which my hon. Friend probably wishes to put to me.
There will be some whose trading position will not justify any increase, and I have little doubt that at the end of the year the figures will show that the overall increase in dividends has been well below 3½ per cent. If for some reason comparison with last year is not appropriate, it will be open to a company to declare a dividend at the same rate as two years earlier—I repeat, the same rate, not an increase on that rate.
There may be cases where dividends paid in each of the last two years are not representative—where, for example, the company has for some special reason reduced its dividends substantially or even paid no dividend at all. In such circumstances, companies may, with the consent of the Treasury, pay a dividend at the same rate as that of an earlier year.
Let me say again that this would provide an opportunity for restoring the dividend to what it had previously been but not for paying 3½ per cent. more than

that. The scheme will apply to all quoted companies, which cover approximately four-fifths of all dividends. But in any event the vast majority of the remaining companies not affected would be close corporations—that is, companies whose dividend policies would be determined by the provisions of the Finance Act, 1965; and such companies would be exempt from the scheme. In the case of these so-called one-man companies, the overriding interest is not dividend restraint but, rather, the prevention of tax avoidance.
Similarly, dividends coming from abroad will be exempt, because there the overriding interest is money coming across the exchanges and assisting our balance of payments situation. Wholly-owned subsidiary companies will also be excluded, because their dividends merely represent the transfer of funds from one company to another and do not add to personal incomes and spending power. In a very similar category are investment trusts and unit trusts, which are not affected, because they are, in effect, agencies collecting dividends on behalf of their members and the dividends they collect will be restricted in the normal way under this scheme.
The scheme came into effect for all practical purposes immediately following my right hon. Friend's Budget speech. However, we recognise the right of companies to complete the payment of dividends which they are in the process of paying and which they are committed for one reason or another to pay. Money accepted from shareholders on the basis of a dividend undertaking contained in a prospectus is an example of the kind of commitment I have in mind. But I want to make it quite clear that that would not cover prospectuses issued after Budget Day. Any dividend promises contained in such prospectuses would naturally have to meet the requirements of the dividend restraint scheme.
We are, I repeat, inviting all quoted companies with normal dividend records not to increase their dividend this year at all; and I think it very likely that many companies will respond to this appeal for self-restraint. Moreover, where they have, for example, paid 10 per cent. for each of the last three years, they will, I imagine, find it inconvenient to pay a dividend at the rate of 10·35 per cent. But wherever


a company wishes to declare a dividend in excess of last year we are asking it to notify the Treasury beforehand.
As s the case with wages and salaries, notification will be voluntary, but the Government will be seeking statutory powers to back up the whole scheme. The powers we shall seek will enable the Treasury by order to require notification and to prohibit excessive dividends. I should add that I have every reason to hope that these powers will be kept in reserve and will remain unused, having regard to the satisfactory voluntary response to the dividend scheme which is already showing itself. The scheme is in full operation and working smoothly. In the first two days after the Budget just over 150 inquiries were handled in the Treasury, and in the great bulk of cases clearance had been given by the end of the following day.
I see no difficulty either in reconciling these additional responsibilities with a board's present responsibilities towards its shareholders and towards the Stock Exchange. Communications with my Department can take place in full confidence and on a hypothetical basis. We should in most cases be able to regard such consultations as notifications for the purpose of the dividend restraint scheme and to give fully effective clearance to proposals in advance of public announcements. This is what many companies are already doing, and the Stock Exchange is quite content with this aspect of our administration.
Alternatively, some companies may prefer to notify the Treasury of proposals only after the formal dividend decision of the relevant board meeting. Where such proposals recommend increased distributions, they will have to be regarded as open to amendment until Treasury consent has been obtained, which should not take more than a matter of days. In the meantime, any publication of those recommendations would refer to this reservation, in the same way, for example, as the announcement of dividends subject to a reference to the Monopolies Commission. This is a fairly familiar circumstance and presents no Stock Exchange problem.
I think that my hon. Friend the Member for Feltham (Mr. Russell Kerr) wanted to intervene.

Mr. Russell Kerr: Is my right hon. Friend aware that millions of workers, and certainly their trade union spokesmen, see no equivalence at all between a delay in dividends, which will be stored up against future payment, and a delay in wage and salary increases which, to the worker, are lost for ever?

Mr. Diamond: I am aware of that point of view. My hon. Friend will, equally, have listened to what I have said about the likelihood of the economic effects of dividend restraint. I do not believe that it will have no effect on future dividends. I believe that the likelihood of the dividend restraint policy will be a permanent encouragement to plough back and to greater investment. I recognise that these two matters are not on all fours, but I have described them in the way I have done, and I am sure that my hon. Friend would be the last person to wish me to attempt to withdraw the dividend restraint scheme.

Mr. Bruce-Gardyne: Does the right hon. Gentleman recall that when he helped to introduce the Corporation Tax scheme he forecast that it would lead to a diminution in distribution and an increase in retentions? In fact, precisely the opposite has occurred. Why should anybody believe his forecasts now, as they were proved wrong then?

Mr. Diamond: The hon. Gentleman is grossly wrong on his facts. His facts are absolutely wrong, as is usually the case. The figures have just been published by the Stock Exchange, and the hon. Gentleman should pay regard to those figures and to any other figures he chooses to study. I have announced the size of the fall in the rate of dividends last year. There was a much bigger fall in the previous year. Therefore, I do not know what the hon. Gentleman is talking about, although that is nothing unusual.
Perhaps I can now move from the technical aspects of the dividend restraint scheme to other technical matters.

Mr. Ian Lloyd: This is a matter of fundamental importance. It appears that the Government are imposing a general freeze, not only on the level of dividends, but on the whole pattern of them. This will make no allowance for the change in the capital employed in a company from


one year to the next. Does this mean that the Government are putting nothing in place of the whole dividend mechanism as the signal system for the investment of capital? If so, this ought to be made clear.

Mr. Diamond: I did not say that the dividend would be calculated on the previously existing capital. Wherever capital has been increased by new cash, it follows that the dividend rate is profit applied to the amount of capital so increased.
I recognise that this is a Budget debate, and an occasion when one would not want to go into too much detail, but I am slightly in this difficulty, that we are inviting the House to approve certain Resolutions at the end of the debate, and I do not want to be accused of discourtesy in not offering an explanation on the more complex Resolutions which have so far not been referred to. Perhaps I might refer to one or two shortly, and at the same time attempt to answer some of the many questions which have been wit during the course of the debate.
Resolution No. 29 refers to the exemption from Estate Duty of certain gifts. At present gifts in consideration of marriage are entirely exempt however large their amount. I think this exemption goes too far, and it is therefore proposed to limit it to £5,000 in the case of gifts by one party to the marriage or by a parent of one of the parties; and to £1,000 in any other case. Any excess over these amounts will, of course, be treated like other gifts inter vivos. The exemption for what are known as normal and reasonable gifts is intended to exclude small regular gifts out of income, not those made out of capital.
With regard to the special charge, I was asked by the right hon. Member for Devon, North (Mr. Thorpe) about the position of trust beneficiaries who cannot touch the trust capital. In such cases there will be provision for the charge to be recovered, as under the 1948 provisions, from the trustees, who will be given the necessary powers to pay it. While I am on this topic, I should perhaps add that I am sure it will not occur to any tax payer, and still less to his adviser, to take advantage of the fact that we are having an early Budget to try to affect the income which will be

the basis of calculation of the special charge, but appropriate countervailing action will be taken.
I have been asked to clarify tee position with regard to post cessation receipts. As the House is aware, the anomaly of these receipts not being taxable has existed for a very long time, and has almost come to be regarded as a right. Certainly many of those who expected to benefit from it took it into account in making provision for their retirement. We have taken the view that the transition into the new system should be eased a little so far as the older tax payers are concerned. Accordingly, we are going to exempt from tax a fraction of their post cessation receipts. A man of 51 will be taxed on 19/20ths of these receipts; a man of 52 on 18/20ths, and so on. A man of 65 or more will be taxed on only a quarter. The legislation will ensure that this relief will be given once only.
I think, perhaps, that I ought to deal with the effect of the new provisions in respect of family allowances and the P.A.Y.E. tables with regard to family allowances. Obviously the most convenient example is a married couple with three children, that is to say two F.A.M. children. Such a married couple earning £15 a week will, under the new proposals, be 12s. a week better off. At £22 a week they will be 2s. 6d. a week better off. For a family with two children, that is only one entitled to family allowance, at £20 a week they will be 2s. better off. I have chosen figures which indicate that below that the greater the advantage, and above that the advantage dwindles away.
In this connection I recollect that the right hon. Gentleman made a comment about the provision for the three waiting days, which seems to have been misunderstood. Since 1948 the position has obtained that no payment is made for isolated days of unemployment or sickness, and no payment is made for the first three days, unless unemployed two weeks or more. Since then the need has been vastly reduced by occupational schemes for sickness, by wage-related benefits, by redundancy pay, and by increased supplementary benefits. As a result, these payments are largely duplicated, and therefore wasteful. Very often a payment is merely made to an employer in repayment of a payment which he has made to his employee. It goes without saying that


wherever real need exists supplementary benefits are there to deal with it. In these circumstances, we thought it right to discontinue these payments, and the matter will b: provided for in a Bill which will come before the House and be fully discussed.

Mr. Michael Foot: What is the number of people who will be excluded from payments under the Government's proposals, and how much Government saving is involved?

Mr. Diamond: The Government's saving is about £15 million from all the proposals which we will bring before the House. I have not the detail for which my hon. Friend has asked, but he will have an opportunity of asking for and ensuring that he is provided with that information before the debate takes place.
I was also asked—and this is the final detailed point—to illustrate the effect of the Budget on the average motorist. For a car selling at the full retail price before the Budget of about £600, the Purchase Tax increase is approximately £3 a year over the life of the car. If bought under hire-purchase, the increase in the monthly payments is about 14s. There is, in addition, the extra licence duty and the extra tax on his petrol. These two on the average annual mileage of 7,500, amount to about 4s. a week. In short, therefore, the total extra cost, both of buying a car and running it, will be about 8s. a week.
There may be other detailed points, but I hope that the House will be good enough to defer these until we reach the Finance Bill, which I hope will be published in about two weeks' time. Once we settle down to the rather cosy exchanges in Committee, I shall be only too glad to give all the detailed information for which I am asked.
I turn, now, to the major topic of public expenditure, and to the attack which the right hon. Member for Enfield, West (Mr. Iain Macleod) made on it.

Mr. Iain Macleod: If it is not convenient to his speech, perhaps the Chancellor could pick this up later. At the beginning of the debate, I asked a most important question about what it was thought the effect on employment and unemployment might be of the Budget proposals. We have been given estimates of so many things, of

exports, costs, prices, investment, and so on, but not of employment and unemployment. May we have that before the debate ends?

Mr. Diamond: My right hon. Friend has carefully noted what the right hon. Gentleman said.
I deal now with the speech of the right hon. Gentleman, which he made in his capacity as shadow Chancellor. Listening to it, I divided the speech into two parts. The first part consisted of extensive quotations from his favourite author, and the second alleged that public expenditure was out of control. This is an allegation which falls on fertile soil, and it may be that is why it was made, but lest anyone should believe that the accusation is to any extent justified, I want to deal with the matter pretty fully.
The House, by whose authority expenditure is met, is entitled to all the facts, and I, who share responsibility for the expenditure of thousands of millions of £s of other people's money, money derived from the working man's beer and baccy, and from the wealthy man's Income Tax and Surtax, am entitled to be heard on the discharge of my responsibilities.
Several questions arise. The first is, is any of that expenditure wasted, in the sense that the same policy ends could have been achieved more cheaply? I am not denying what the right hon. Member says; I shall give examples. Other more fundamental questions follow. But let me first examine the allegation of wasteful expenditure.
I preface my remarks by saying that I know of no business which subjects its expenditure to the same detailed rigorous, continuing examination. We have, first, the accumulated skill and experience of the Treasury, which is abreast of the most advanced companies in its knowledge and use of modern methods of administration and in relating the cost incurred to the benefit obtained.
In every major Government Department these same skills are mirrored in a similar group exercising similar responsibilities for that Department alone. But, as the House knows, the matter does not rest there. The Comptroller and Auditor General and his large staff of nearly 600 roams, as every auditor should, over


the whole field of expenditure, examines and scrutinises at will, and has access to all files and papers. He is at liberty to report on any aspect of Government expenditure, and his liberty is protected by his being employed and paid not by the Government but by the House.
There is no need for me to remind you, Mr. Speaker, of the devotion to their duty of Members of the Estimates Committee and of the Public Accounts Committee, whose freedom to examine is equally uninhibited, and whose reports are published and debated. Certainly the field is very large. Public expenditure is running at £15,000 million a year and supply expenditure at about £10,000 million a year.
With such massive figures it would be suprising if no errors occurred—and, of course, they do. On many occasions since I have been Chief Secretary I have had to offer explanations relating to Government expenditure thought by the Pub-lice Accounts Committee to require explanation. But to the best of my recollection all the explanations have related to matters occurring during the previous Administration—occurring at a time when the very Tories, who accuse me of inadequate control, were themselves at the helm.
The list is long and the Reports speak for themselves. But that is only during the period during which I have held office. All of us who were in previous Parliaments have the clearest recollection of allegations of waste, and if I may take a leaf out of the right hon. Gentleman's book and quote my favourite author I would refer him to the speech that I made from the benches opposite on the Ferranti episode—the first, but by no means the last, of such revelations.
How many were not revealed, how much waste in public purchasing went on which we shall never know about, is an open question. From what has come to light—all of which has demonstrated beyond question the inability of a Tory Government to protect the taxpayer in their dealings with the private sector—any reasonable man would assume that the system which permitted and encouraged those scandals which we now know about permitted and encouraged some others.
I make this assertion because the underlying system remained the same. The provision of complete security against inspection of the contractors' telltale records, combined with a theoretical limit of profits for presentational purposes only, and all in a field where the maximisation of profits is a duty and public service a myth, was of course likely to result in the excesses which are now public knowledge.
The key to the matter is post-costing and the opening up of the books, upon which, in spite of recommendations broadly to the contrary in the Lang Report, I have been able after two years of patient negotiation to reach agreement with industry. I am grateful for that agreement, which should result in a much healthier relationship between the Government and their contractors. But of one thing I am certain; that the people who are not entitled to talk to us about the control of public expenditure are ex-Ministers of the Tory Government.
But the matter by no means rests there. There are at least three more questions which require answering. Why did we plan to increase public expenditure at a much greater rate than our predecessors? why are we not able to keep to our plan? Why do we not adjust our plans to the resources available? All these questions are very relevant when considering a Budget which provides for increases both in taxation and in public expenditure.
The short explanation of why public expenditure grows faster under Labour is that it does not. Let me repeat the figures for the last five years of the Tory Government: in 1960–61 there was an increase of 4 per cent. in public expenditure, in 1961–62 it was 7½ per cent.; in 1962–63 it was 1 per cent.; in 1963–64 it was 51 per cent., and in 1964–65 it was 5 per cent.—average, 4·6 per cent. It is well known and generally accepted that expenditure in a given year reflects policy decisions taken much earlier, and that one cannot expect decisions to reduce expenditure to have effect for some time. Nevertheless, it is perhaps convenient to regard 1964–65 as the last Tory year. Accordingly, the comparable figures for this Government are: 1965–66, increase in public expenditure, 7 per cent.; 1966–67 increase 1½ per cent.; in 1967–68


just under 7 per cent.; in 1968–69, 3¾per cent., and in 1969–70, 1 per cent. The last two years are based on detailed estimates, and I have no reason to believe that they will not turn out to be completely accurate. The average is 4·4 per cent., broadly the same rate of increase as before. I want to deal with all the right hon. Member's Questions because they are equally without foundation.

Mr. Michael Alison: On the last figure that the right hon. Gentleman gave for 1968–69, how does he reconcile the figure of 3¾ per cent. with the 4·6 per cent. in the Financial Statement?

Mr. Diamond: I must tell the hon. Member that it was not.
The next question asks why have we failed to control public expenditure, in the sense that we have allowed it to grow faster than intended. The short answer is that we have not; we are precisely on target. In two years' time I expect to be announcing that we have hit the bull's eye. It should be remembered that the original five-year plan described the destination but did not attempt to plot the path in yearly stages. Public expenditure did not, does not, and is not expected to grow at an even annual rate.
The rates that I have quoted for the last five Tory years varied between 1 per cent. and 7½ per cent. Our rates vary between 1 per cent. and 7 per cent. There is no particular magic in a period of 366 days for these purposes. Inasmuch as public expenditure is one of the weapons in our economic armoury it is right to use it for the purpose of evening out variations in demand, in the interests of economic stability. Certainly one has to make broad corresponding adjustments in public expenditure in subsequent periods, just as we have done. But it would, for example, be cruel lunacy to allow unemployment to climb because of a slavish adherence to an estimate based on assumptions which external events have invalidated.
That is exactly what happened in 1967–68. Our domestic expectations were falsified by foreign events. The closure of the Suez Canal, the German recession, the American economic difficulties, all had a marked effect. It became necessary to supplement falling private in

vestment with growing public investment and to avoid a serious worsening in winter unemployment. If we had not been prepared to bring forward certain expenditure proposals we should have suffered economic damage and higher unemployment. That is a sacrifice on the altar of inflexibility which this Government are certainly not prepared to put upon our people.
Nevertheless we are, I repeat, back on target—on our original target. But there remains the final question—the 15 billion pound question: why do we not lower the rate of growth of public expenditure to match the rate of growth of our national wealth? There are four parts to the answer to that question.

Miss J. M. Quennell: I have been listening closely to the right hon. Gentleman for the last ten minutes. It is difficult to reconcile what he has been saying with the Report of the Estimates Committee investigating the Supplementary Estimates. Can he help?

Mr. Diamond: Indeed I can. The hon. Lady said that she had been listening carefully. I would not disagree with an hon. Lady, but I suggest that she reads my speech in HANSARD, when she will see that I have not been referring to the Estimates but to public expenditure. We had a debate on the Estimates, which I hope she attended, but, in case she did not, I will say that I dealt then fully with precisely that point. She will find in HANSARD a full explanation of that different issue, which is not the one which I am dealing with in a speech related to the Budget.
I now come to the final question, and, as I said, there are four parts to the answer. The first is that growth is one of the elements which we take into account. As the Chancellor made clear, we shall have regard to our likely resources in the planning of public expenditure for 1970–71, which we shall shortly be reviewing.
The second relates to the composition of public expenditure. When we talk of an increase of 3 per cent. in the economy, we do not mean that every sector grows at the same rate. Industrial production grows at a faster than average rate, because industry can take full advantage of the greater mechanisation which produces growth; but the product


of certain other sectors grows at a less than average rate. This applies particularly to services which depend almost entirely on manpower, such as teaching and nursing.
In order, therefore, to secure a matching growth in the volume of public services, one inevitably incurs a more than average increase in cost. This was made clear in the original five-year plan, which provided for a rate of growth in public expenditure distinctly higher than the overall rate of growth in resources.
This is closely linked to the problem of pressures arising out of demographic factors. If, for the sake of simplicity, we divide the population into the young, the producers, and the old, then it follows that, in a period such as the present, when the young and the old form a larger proportion of the population, providing for their needs constitutes an increasing burden on the producers. That provision includes more schools and universities, more hospitals and more old-age pensions, and results in a greater claim on production.
But it is the last part of my answer which provides the key to our differing attitudes. At present, there is a hue and cry about public expenditure. It will not last: in a sense I wish it would, for the pressures for increased public expenditure in a democracy are so great that counter-pressures are welcome. But I know from long experience that it lasts one week—Budget week: the week when we must have regard to paying the bill. For the remaining 51 weeks my colleagues and I will be subject to endless pressure by individuals and groups to increase public expenditure in one form or another—[Interruption.] Yes, from both sides, and every hon. Member. Without exception, every speech will ask for a reduction in the total and an increase in the elements which constitute it. And, of course, the Tories will play their full part in that—promoting bills for wasteful social security payments, and opposing our plans for reducing defence expenditure.
But, for the present, the attitude of the Opposition is one of hostility to paying the bill. I well understand that, because it is that very payment and the corresponding public expenditure which together constitute a measure of redistribution of

wealth and go some way towards reducing inequality in our society. Taxes alone do not achieve that: the basic inequality stemming from differing incomes is hardly affected by the payment of taxes. The rich man pays high rates of Surtax: the poor man still higher rates of tobacco duty. It is not the taxes but the services they finance—the social security payments, the family allowances, the various subsidies—which make for greater equality.
And it is because those payments form a considerable element within public expenditure that we on this side look upon it differently. Public expenditure must be controlled, as it is; it must be economical, as it is; it must be directed to strengthening the economy, as it is; but there must be an irreducible element which enables the rich to contribute towards the needs of the poor, and which, therefore, makes ours a better and a more equal society. It is because this Budget continues, and indeed increases, this element of redistribution that I know my hon. Friends will give it full support.

4.25 p.m.

Mr. Patrick Jenkin: We have had from the Chief Secretary an extremely dreary economic lecture, which has satisfied no one, least of all his hon. Friends below the Gangway. There was one thing in it with which I could agree, however—his statement that the position is very different from that of a year ago. He can say that again. He is the one Minister in the Treasury who has sat on that Bench as a Treasury Minister throughout this Government's period of office. Chancellors may come, Financial Secretaries may go, but the Chief Secretary goes on for ever. Therefore he, more than anyone else, bears responsibility for what has happened and needs the more carefully to justify what the Government, and in particular the Treasury, have done.
The right hon. Gentleman claimed that the Budget redistributes income. The only beneficiary of the income so redistributed is the Government, and the whole of the lengthy explanation to which we have been subjected about the purported control and restraining of Government expenditure entirely missed the point. The basic flaw in the right hon. Gentleman's argument, particularly his comparison of


the record of my right hon. Friends when in office with that of the present Government, is that our growth in public expenditure was achieved out of a rising national product, a growth of 25 per cent. in the six years before the 1964 Election, and was accompanied by a reduction in taxation, whereas, over the last 3 years, Government expenditure has continued to rise, growth has been negligible and taxation has soared. That is the difference between the two parties.
I have one preliminary criticism of the way in which this debate has been run by the Government. I have sat through most of it and have heard hon. Members on both sides ask many questions, some of which the Chief Secretary has tried to answer. They have sought to probe the Chancellor's judgment, have sought clarification of many of the proposed changes, and have questioned many of the figures on which the economic forecast has been based. I believe that the House is entitled to expect that the Minister who is winding up on the day in question shall go at any rate some way towards answering some of the questions raised in that day's debate.
But, on Wednesday, the Financial Secretary appeared to be so overcome by his experience in Washington that he devoted more than half his speech to a eulogy of the central bankers. And on Thursday, the Secretary of State for Economic Affairs, in a speech whose obscurity was by no means alleviated by the manner in which he read it to the House, raised more questions than he answered and repeatedly refused to give way to my hon. Friends, knowing as he did so that there would be no Government winding-up speech that night. Instead, we had a speech from the hon. Member for Heywood and Royton (Mr. Barnett), who is the Chairman of the Labour Party's Finance and Economics Committee, who, so far from clarifying the Minister's intentions, declared that the incomes policy was unworkable and not worth the trouble it causes.
The House has been shabbily treated. Tonight, the Chancellor will wind up and we are entitled to ask that he shall make some attempt to deal with the debate and not merely content himself with a reassertion of the general case, coupled with

sufficient class spite to earn himself another ovation from his less discriminating supporters.
There has obviously been one question during the debate which has caused great dissention in the party opposite and which is not so irrelevant as it might appear. This is the question of whether or not this is a "bankers' Budget". The hon. Member for Tottenham (Mr. Atkinson) had no doubt about it. He said:
The whole purpose of the Budget has been to placate bankers and speculators…"—[OFFICIAL REPORT, 20th March 1968; Vol. 761, c. 486.]
The hon. Member for Loughborough (Mr. Cronin) congratulated the Chancellor on gaining
the applause of the gnomes of Zurich last night and the Stock Exchange today."—[OFFICIAL REPORT, 20th March 1968; Vol. 761, c. 521.]
I find myself in close agreement with the hon. Member for Ashfield (Mr. Marquand) when he said that he not only agreed that it was a bankers' Budget in the sense that the Chancellor
had to take into account not only all the objective, economic considerations, but also subjective, psychological, confidence factors."—[OFFICIAL REPORT, 20th March 1968; Vol. 761, c. 652.]
but that it would have been suicidal to have ignored them.
After three and a half years of struggling with the management of a reserve currency without the confidence of the financial community, it is something of a gain that both the Chancellor of the Exchequer and his more discerning supporters have learned that lesson. It cannot be repeated too often. It was not the balance of payments deficit per se which in 1964 caused the run on confidence. Indeed, that did not happen until November, 1964. The deficit was described by the former Governor to the Bank of England as "substantial but not unmanageable." It was due to the reckless squandering of confidence by the Prime Minister and other Ministers during the weeks which followed the election. That is the significance of the words which the Prime Minister used in the House on 23rd November. He said:
…in the course of the past week there has been this new development arising from confidence factors…


My hon. Friend the Member for Louth (Sir C. Osborne) had just asked the Prime Minister:
Has this pressure arisen only since last Thursday?
The Prime Minister replied,
I said ' in the course of the last few days'".—[OFFICIAL REPORT, 23rd November, 1964; Vol. 702, c. 933.]
The events which followed devaluation and the recent events leading up to the Washington meeting demonstrate not only the sensitivity of the whole international monetary system to speculative pressures, but also how important is the state of health of sterling to its proper functioning.
Of all the sins of omission and commission which the Prime Minister has committed—and they have been legion—I believe that history will reserve its bitterest condemnation for the way he played politics with the £ immediately after the 1964 election. It is nothing less than the truth that in this Budget the country is still reaping the whirlwind which the Prime Minister then sowed. In that sense, it is a bankers' Budget.
That brings me to the second question which has been asked about the Budget: has the Chancellor overdone it? Has there been over-kill? Certainly, taking £775 million out of the economy this year and £923 million in a full year was substantially more than even the higher end of most of the forecasters' brackets. Certain it is, too, that the procrastination and taking the necessary steps after devaluation has appreciably added to the figure.
An authoritative journalist who writes on economic matters, Michael Shanks, said this in The Times last Monday:
Like many others, I argued at the time of the public expenditure cuts in January that the Government was making a grave psychological mistake in not applying the regulator to consumer spending at that time, and that we would have to pay for procrastination by extra taxation in the Budget, to the tune of perhaps £100 million more than might otherwise be necessary.
He went on to say:
With the benefit of hindsight, I would now modify this forecast…I underestimated the cost of procrastination; it now looks nearer £200 million.
What a comment to make on the Chancellor's stewardship.
Even with that, however, has the Chancellor overdone it? Will his policy succeed? Here, the Press is somewhat divided. A leading article in The Times after the Budget concluded:
…there is underlying this Budget a coherent policy for strengthening the economy. It is a policy which has some chance, though perhaps not a very good one, of being brought successfully to fruition.
It was strange to find that on the same day, writing in the same newspaper, Mr. Peter Jay had this to say:
It should give devaluation a virtually certain guarantee of success.
The Guardian was even more schizophrenic about it, as, perhaps, one would expect from a paper which supports the Liberal Party. On the front page we had:
The Chancellor was asked to go for overkill ', so that our ability to defend the new parity of the pound would be out beyond doubt, and he has done so.
On the same day, on page 7 of the same paper, we had the heading
Chancellor avoids overkill ' Budget
and the sentence
To have gone higher would have been to indulge in sadistic overkill'.
The Economist on Friday, after condeming what is called
this appalling nonsense of an incomes non-policy,
went on to say that it
has clearly obliged Mr. Jenkins to go for some overkill in his tax take.
On the other hand, in yesterday's Sunday Times, Mr. Malcolm Crawford, the economic editor—[Interruption.] I am giving the Chancellor the benefit of the doubt. Press comment is divided. Mr. Malcolm Crawford said that
the official figuring of the Budget's effects on consumer spending look distinctly on the high side. This is certainly not an 'overkill' Budget, however fat and impressive £923 million of extra tax may appear.
The Chancellor, faced with that conflict of opinion, is entitled to argue that he got it about right. Certainly, faced with the situation as it was last Tuesday, it seemed to me that he was right to err on the safe side. As my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said on Wednesday, however, there is, to put it no higher, a possibility that he has taken too much.
That is understandable. The Chancellor came in with the job of picking up


the bits left by his predecessor. His predecessor had proved consistently wrong and consistently overoptimistic year after year. He did not acquire the name of Sunny Jim for nothing. It is natural that the Chancellor should do everything he could to avoid repeating the mistakes which inexorably led us to devaluation and disaster.
I will give him this. There are, indeed, many uncertainties ahead. Perhaps the most significant is the level of world trade and the related problem of the international monetary system. If the American Government really set about correcting their balance-of-payment deficit, while that may help to stabilise the monetary position it could also delay our own recovery.
When I was in Washington last month, I found in official circles a ready and sympathetic understanding of the need for Britain and America to avoid cutting each other's throats in their efforts to correct their payments deficits. The Americans were conscious that it was the devaluation of sterling which triggered off the scramble for gold and speculation against the dollar. I was astonished to return to find that there were members of the party opposite who somehow tried to deny that and criticised my right hon. Friend the Leader of the Opposition for having suggested that gold speculation was anything to do with devaluation.
In Washington, I was presented with a book put out by the United States Treasury called
Maintaining the strength of the United States dollar and a strong free world economy".
On page 61, under the heading "New Action Program", it stated clearly:
The British devaluation of sterling has reinforced the urgency of the need to improve the. U.S. balance of payments. The British move created uncertainty and unrest in the international monetary system and doubts about the future stability of the dollar. That is accepted by everybody.

Mr. Charles Pannell: The first reaction which I have seen of the United States Information Service on the question of devaluation said this, on 21st November:
The United States used the devaluation of the British £ as a healthy and constructive development within the framework of the international monetary system.

Not one American journal of quality says that the trouble was triggered off by our devaluation.

Mr. Jenkin: I will not weary the right hon. Gentleman with any more quotations, but I assure him that all the circles—banking, industrial and official—with whom I spoke in the United States had absolutely no doubt that the two things were connected. The important lesson to learn from this—and I am sure that the Chancellor accepts this if no one else does—is the need for much closer co-operation between the American and British authorities in correcting their balance-of-payment deficits.
One has to point out also that in America strong pressures for protectionism are coming from both industrialists and the unions. They want protection against foreign competition, and in an election year this could be a serious development. How far the Administration is able to resist those pressures remains to be seen, because one undoubted difficulty is that since the President has called for a correction of the deficit, protectionism can now be seen to be "clothed in the American flag", as one official put it to me, and the situation must be watched.
We welcome the fact that the Chancellor is going to Washington next week, and we hope that his talks there will be fruitful. We recognise, therefore, that the Budget had to be severe, that there are many uncertainties ahead and that, in these circumstances, it was right that the Chancellor should over-insure rather than under-insure. But, allowing for these things, by the massive new taxation which he has taken, he may have overdone it. Time alone will tell.
What one can say with complete certainty, however, is that such a monstrous Budget should never have been necessary. That the Chancellor should have to introduce a Budget embodying increases two-and-a-half times higher than any previous Budget stands by itself as a condemnation of the Labour Party's three-and-a-half years in office. It is the culmination of one of the most disastrous periods we have had to endure since the war. The Press has run out of epithets to describe it. The Chancellor himself described it as "harsh"—others have said, it is brutal, punishing and


nasty, one of the most formidable packages in living memory.
The Government claim that it is necessary to make devaluation stick. This is, at best, only half true. In fact, it was forced on the Government by a terrifying impotence to control their own soaring programmes of public expenditure. My right hon. Friend the Member for Enfield, West has already laid bare the hollowness of the argument of the Chief Secretary, which entirely ignored the comparative growth rates achieved under this Government and former Governments. Even last year the then Chancellor recognised in 1967–68 that the increase in public expenditure, over £1,000 million, was high, but he said that he was going to "rein back"—those were the words he used—public expenditure this year, in 1968–69. But what has happened? During 1967–68, on top of that already high estimate, we had over £500 million of Supplementary Estimates, and then this year we find that the Financial Statement makes provision for £1,100 million more than the estimates for last year and over £600 million more than the out-turn of last year. Now it is for 1969–70 that the reining back is promised. Indeed from what the Chief Secretary said, we will no doubt have to go on waiting until 1970–71, because those estimates are now being carefully reviewed. The British people must realise that, in large measure this huge extra taxation is necessary to pay for massive increases in Government expenditure.
Another Government reason is that this harsh Budget is needed to correct what was described as a long-standing weakness in the British economy, no doubt what the President of the Board of Trade meant when he referred to the
…long-term deterioration in Britain's trading and payments position."—[OFFICIAL REPORT, 20th March, 1968; Vol. 761, c. 455.]
That is a great distortion of the position and I am happy to put the President of the Board of Trade right by quoting to him an authority to whom he will pay the highest respect, Sir Richard Powell, who until recently was Permanent Secretary to the Board of Trade. Speaking to a B.I.M. conference on 21st February, he said:
Before the war, our visible exports paid for only two-thirds of our visible imports. The rest we were able to pay for out of our

income on investments. The loss of assets and accumulation of debts during the war completely upset this pattern. The new situation required a massive increase in exports, and it would be grudging to regard our response as anything other than highly creditable. Ten years ago…the proportion of our imports paid for by exports had risen from the prewar two-thirds to around 90 per cent., and in the 1960s it rose further to some 95 per cent.
It does not lie in the mouths of Ministers, therefore, to talk about a long-term deterioration in our trading position. Devaluation was the inevitable result of mismanagement at home and loss of confidence overseas. What the Chancellor is doing in this Budget is presenting the nation with the bill. When this is contrasted with the blithe promises—perhaps, for the benefit of the Prime Minister, I might add "solemn pledges"—made in 1964 and 1966, no wonder the public is disillusioned, disenchanted and disgusted. We all know the relevant quotations from the speeches of the Prime Minister and the Home Secretary. I will not repeat them. Not so well known are some of the things that have been said by the present Chancellor, who has also been guilty of making some rash promises about taxation. He wrote a book entitled "Labour's Case" which was published a little while before the 1964 election. In it he wrote:
The commitments of the Labour Party's policy—provided they are not all rushed through in the first year, which nobody has ever suggested—can be carried out comfortably without any question of an increase in the tax burden. On the contrary"—
he declared
they should leave room for substantial tax reductions".
This is the Chancellor whose very first Budget is two-and-a-half times the size of any previous Budget.
Let us consider what the Labour Party have done as a whole. In three-and-a-half years, they have increased taxation by over £2,000 million. If one includes the temporary taxes, the figure is £2,312 million. If one compares that with the 13 years of Conservative rule, one sees that my right hon. Friends succeeded in cutting taxation by over £2,000 million. There is the difference between Socialism and Conservatism. As Aneurin Bevan said, "Why look in the crystal when you can read the book?".
Consider some of the tax changes that the Chancellor has made. Many of


them are relatively minor. We welcome the exemption limit of £50 for Capital Gains Tax. We have always argued that it should indeed be higher because I do not think that, at this level, it could save much work by the Inland Revenue. We welcome the raising of the age exemption limit, although this followed inevitably on the fact that a full year's pension increase was coming in this year instead of for only part of the year.
Some of the changes are anti-avoidance measures, and these must obviously be part of the right hon. Gentleman's armoury, although it is right that we should scrutinise them carefully to ensure that we avoid injustice and any element of retrospection. It is here that I must draw a distinction between what have hitherto been regarded as normal and legitimate ways of managing one's affairs and the very much more abstruse, technical and deliberate tax avoidance devices followed by some of the experts. The Chief Secretary will know what I mean by that. In the case of the latter, there may be an argument in favour of retrospection. In the case of the former, never.
In this group of measures, first of all we have the aggregation of investment income of children with income of parents. The Chancellor sought to justify this by reference to the analogy of the husband and wife. My hon. Friends and I do not accept that and, when practicable, we shall propose to disaggregate, he incomes of husband and wife because there is no doubt that this acts as a disincentive to wives going out to work.
From the point of view of children, all sorts of anomalies will arise. Consider, for example, the case where the father has died and has left his property between his widow and daughter aged 18 or 19. Suppose that his daughter is married. Will her investment income be aggregated with that of her husband and her mother? Then take the case of a girl who comes to town during the week to work, perhaps as a secretary, and who has some investment income. Will that be aggregated with her mother's because the girl happens to go home at weekends? All sorts of problems arise. What about the child who saves out of any earnings he may have? Is this the time to tell young people

that it is not worth their while saving until they are 21? And then consider the extreme case of a juvenile pop star who has enormous amounts of unearned income from say royalties? Will that money be aggregated with the earnings of his father, who might be a poor miner in Wales? [Interruption.] Of course this is an absurd example, but I am giving it to illustrate the sort of problems that may arise and the sort of difficulties which we may have to face unless these problems are dealt with.
I think I know what the Chancellor is getting at in this provision and I hope that when the Finance Bill is published it will deal with these matters and that it will be seen to apply to only what I believe him to have in mind. I say that because unless the provision is restricted, considerable harm will arise and there will be great anomalies and injustices.
Consider Estate Duty changes. Under the Budget Resolution these are expressed to take effect in respect of deaths after 19th March. The first one is an aggregation of insurance policies in which the deceased never had an interest. This hits every family which has taken out an insurance policy or family protection policy under the Married Women's Property Act. This gives rise to the points to which I referred when I drew a distinction between retrospective and other legislation. This is a clear and recognised method of making provision for widows and children in the event of untimely death. Many thousands of people must have taken out policies relying on the law as it existed, on the Finance Act, 1894, and the Married Women's Property Act, 1882. The essence of the problem is that the man has no rights in the policy and that it is for the protection of his wife in the event of, for example, his bankruptcy, and certainly in the event of his death. They were relying on the well-established rules that these policies would of course, be dutiable but would be non-aggregable with the rest of the estate.
By applying the new rule to all existing policies, the Chancellor of the Exchequer is engaging in a wicked piece of retrospective legislation which could give rise to very considerable hardship in thousands and thousands of cases. That is especially so in the case, which is not unusual, in which the free estate may


be large, difficult to value and difficult to realise quickly because there are shares in a private company. In such cases, the effect is that the widow has to wait for the insurance money because the company cannot pay out on account of the Estate Duty risk. This could give rise to extreme hardship. The proposal as it stands appears to be totally unacceptable and at the very least it must be amended so as to apply only to policies taken out after 19th March.
The same comment can be made about the extension of the five-year rule to seven years. This has a retrospective effect because it takes effect in respect of gifts already made, where part of the time has already run. I cannot do better than to read a letter which I received from a constituent on Friday who wrote to me about Estate Duty. I will not read the whole letter. This lady, who writes from an address in a council flat, received a gift from a wealthy old lady of 90 in December 1965. She wrote:
I was informed by her accountant that the £3,000 was liable to Estate Duty of £1,800 (death within two years)
—the old lady was very wealthy indeed—
which subject to the ruling then, had decreased to £1,530 in December 1967. Owing to her age, I was unable to make any provision for this Estate Duty liability by means of an insurance policy. Now after two years I find myself liable to the full amount which is due to the Government introducing an increase of a further two years before any such reduction can take effect and another two years before I can be assured that the £3,000 is mine…I am receiving a retirement pension of £2 0s. 6d. per week and I have only a small amount of capital. I consider the Government's proposal is not only a prejudice against the rich but the poor as well.
That puts my objection to the proposal in a nutshell. The proposal must apply only to gifts made after 19th March.
Next I come to the Financial Resolution which the Chief Secretary was good enough to explain—that concerning the withdrawal of the death duty exemptions in respect of marriage gifts and also the deduction of normal expenditure. I know that many people will be relieved to hear that it is not proposed to alter the exemptions for normal expenditure out of income. There must be many small annuities which should never count for Estate Duty.
I come to the question of the apparent anomaly of post-cessation receipts. It

is important to realise that this does not apply only to barristers but to any professional men paid on a cash basis. Barristers are affected particularly because they are not allowed to be assessed on an earnings basis because they cannot sue for their fees. That is why this is a matter of greater importance to barristers. The Chief Secretary apparently says that they are allowed to be taxed on an earnings basis, but I have it on the authority of the Bar Council that barristers are not allowed to be taxed on an earnings basis.
May I make these comments about the proposed change: the Royal Commission recommended that this change should be made but they said that it should be subject to two conditions. The first is that there should be adequate provision for averaging out widely fluctuating incomes and the second is that there should be adequate provision for retirement benefit. Nothing whatever has been done about the first condition and it does not appear that it is envisaged that anything will be done. On the second condition, it is true that the Finance Act, 1956, made provision for retirement benefit for self-employed people but not so that they could ever take a lump sum. Even in the public service, civil servants, teachers, police and others are entitled to commute part of their pension to a lump sum to give them money with which to buy a house when they retire. If the proposed change goes through in the form which the Chancellor explained and which the Chief Secretary repeated, it appears that self-employed people will be much worse off.
There is also the hardship which will arise for the barrister who has high earnings and who is appointed a judge, because his post-cessation receipts will be aggregated with his salary in the first year, and that could give rise to very considerable taxation difficulties indeed and to a very high rate of Surtax.
Another category of changes includes those in Selective Employment Tax. The Government have admitted that S.E.T. is a crude weapon. Inevitably the increase in the rate multiplies the absurdities and anomalies. It exaggerates the folly of the totally unjustifiable distinctions which the Government have drawn—and I will not weary the House with those. By widening the margin between those inside


and those outside the magic circle, it heightens the aura of farce which has surrounded this tax ever since it was introduced.
We are promised two minor reliefs but we have to await the Finance Bill until we see how they work. Nothing has been done for the disabled, nothing has been done for the service industries engaged in exports and nothing has been done for firms which make a massive contribution to our balance of payments earnings on invisible account. I could tell the President of the Board of Trade—I am sorry that he is not present—who was glorying in the enormous benefit which accrued to the balance of payments from the invisibles, that it is no use doing that and then clobbering these firms with an additional 50 per cent. in Selective Employment Tax. Or perhaps he expects that British export houses will set up in rural hotels in Scotland and Wales?
Here I must make a firm protest about the way in which the Financial Resolution on S.E.T. has been drawn. Last year we ran into difficulty because many Amendments which we wanted to put down were out of order because of the restrictive way in which the Resolution had been drawn. As it is drawn at the moment, we cannot put down any Amendment to affect the imposition of Selective Employment Tax if this could be done by Statutory Order, under Section 1 or Section 2 of the Act. I beg the Chancellor to look at that again, because it is too restrictive.
He has been having elaborate talks with the British Export Houses Association whether they should be relieved from tax. We are precluded from putting down an Amendment which would allow us to debate that and would allow the Chancellor to explain why it cannot be done. Will he look at that again? The Budget debate is the only opportunity we have to raise this point and I hope that the Chancellor will look sympathetically at it.
I have two brief comments to make about Purchase Tax. If new taxes had to be raised, then we welcome the emphasis on indirect taxation. We have always argued that that is right, and I find myself in close agreement with the Chancellor's reasoning. But the actual

changes which he made are retrogressive. Under a Conservative Government we progressively reduced the highest rates, narrowed the differences between the rates and broadened the base of the tax. This Budget reverses every one of those processes. It reverts to a new and much higher rate, it widens the range of rates and does nothing to widen the base. That is the wrong way to raise revenue and I hope that my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) will be sharpening his pencils and ordering another 1,000 copies of the Question forms.
Of the other indirect taxes, many of my hon. Friends have singled out the motorist as receiving the toughest treatment. The Chief Secretary told us today that the extra taxation which the average family motorist will bear is over £20 a year. I have seen it calculated that the motoring taxes which the average family man with one car will pay now amount to over £100 a year. It is not unrealistic to expect that someone earning £20 to £25 a week should be running a motor car, and £100 of motoring taxation seems excessive.
Of course, the real damage is the effect on industrial costs which we on this side of the House, after study, estimate at over £200 million. That is the extra cost on industry as the result of the motor taxes, and it is an additional whittling away of the advantages which devaluation is supposed to have brought to industry.
May I say a word about drink, although before doing so I declare an interest as an employee of a whisky company. I should like to make two points on this subject. The Chancellor has raised the duty on wines and spirits and left alone the duty on beer. I am sure that he recognises that if he uses the regulator and he has reason to use it in a downward direction, he will not be able by the regulator to reverse what he has done in the Budget unless he accepts an Amendment on the lines of that moved last year by some of my hon. Friends to split the category of alcoholic drinks between beer, on the one hand, and wine and spirits, on the other hand.
Secondly, in an article in The Times on Thursday it was stated not only that the sales of spirits would fall as a result of the increase of 2s. 6d. but that the Revenue would fall by £16·5 million. Is


this true? If that is right, this is an inflationary change. It will mean more money in the pockets of the public. The Chancellor must clear this matter up, since it appeared in public.
Finally, I come to the only new tax—the special charge on unearned income. I believe that, on reflection, the right hon. Gentleman will regret the sarcastic, even flippant tone he chose to introduce this tax with. That is the sort of thing we have come to expect from the Leader of the House, the Minister of Transport, and one or two other Ministers, but not from the Chancellor. However, no doubt it was necessary to consolidate his personal support in his party, through the group called, I understand, F.O.R.J. "Friends of Roy Jenkins"—a curious title, surely, for someone in charge of the nation's accounts.
However, I have no doubt that the right hon. Gentleman is now ashamed of his tone. But is it not strange political morality which can look with benign anticipation to the introduction of a national lottery, which will bring huge tax free windfalls to people whose only claim to such wealth is the luck of the draw, while the accumulation of savings is found so offensive as to merit taxation at the rate of 27s. 3d. in the £? What has happened to the brave talk about the "Candy floss, casino society"? Is Socialist morality really so inverted? We shall have to await the details of the Finance Bill. The right hon. Gentleman recognises that this is a confiscation of capital at the higher rates and there are one or two urgent questions about it which he should answer tonight. First, is there to be a credit for any Capital Gains Tax which will be leviable as a result of a taxpayer coming into the special charge and having to realise investments in order to meet his tax liabilities? Secondly, how will this affect the operation of the close company rules for the assessment of a close company's tax in the present year?
It is possible to imagine a case where the Inland Revenue could force a company to make a distribution which would result in a charge on a shareholder, the special charge at the highest rate, which would require the sale of his assets. If these consist only of his shares in the company this could lead to the break up

or loss of control of the company. Will the legislation allow the tax inspectors to take account of the potential liability to the special charge before they make an assessment of a close company? These are questions to which urgent answers are required.
This is a long and complicated Budget and will no doubt lead to a long and complicated Bill. I can promise the right hon. Gentleman that we shall debate the Bill as thoroughly as we can within the rules of the new procedure and that we utterly deplore that it is to be sent upstairs for Committee stage. It is monstrous that a Bill of this complexity and length should be sent upstairs. This is the first time that the Finance Bill will have been taken off the Floor of the House for Committee, and it is a most damaging constitutional change. It means that only one in 13 of right hon. and hon. Members will be able to say anything about it on Committee stage. We shall fight this to the utmost.
The right hon. Gentleman has been congratulated on the lucidity of his exposition and, in many circles, on the courage of the Budget. But his courage was that of a man jumping from a burning building into the firemen's tarpaulin. It is the last desperate attempt of a discredited Administration to recover something from the ruins of the last three-and-a-half years. It can succeed, I do not doubt, provided the Government follow through with resolution what the Chancellor has now embarked upon. But even now his efforts to try to recover the situation and restore some semblance of honesty into the Government's policy is being sabotaged by the Prime Minister, because the Prime Minister, in a letter to the Labour candidate at Meriden only last week, said:
Our record is one of achievement of which we can be proud.
The whole country knows that this Budget is the culmination of three-and-a-half years of Socialist follies and irresponsibilities, when all Labour promises have been shattered, when growth has been abandoned, when, despite massive new powers, the economy has staggered from crisis to crisis. Yet the Prime Minister claims to be proud of the Government's achievements.
I really wonder whether the Prime Minister really is proud of his stewardship


and the fact that, three-and-a-half years after he became Prime Minister and responsible for the nation's affairs, the Chancellor of the Exchequer has now had to introduce a Budget which actually demands a cut in the standard of living of the British people? Why does the Prime Minister continue to pretend to achievements which the whole world knows to be untrue? How far can self-deception go? We shall be voting against the Budget tonight, not because the Chancellor has lacked courage, not because we feel that he has shirked his duty, but because, in the Budget, we find spelt out in stark terms the dreadful price the nation is having to pay for putting faith in Socialist promises.

5.5 p.m.

Mr. James Griffiths: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) will understand that I must begin with his namesake on this side of the House. I hope that it is not too late, even on the fourth day of the Budget debate, to pay tribute to my right hon. Friend the Chancellor of the Exchequer on his masterly presentation of the Budget and the boldness of his proposals. I do so with particular personal pleasure, for it was my privilege to work very closely with the late Arthur Jenkins, the Chancellor's father, in the trade union and Labour movement, and I know how proud he would have been to have seen where his son has got to and the acclaim accorded to him for the way in which he has presented his first Budget.
I do not propose to follow the hon. Member for Wanstead and Woodford into the detailed questions he asked. Such matters should be left to the Committee stage. I have not ventured to intervene for many years in a Budget debate. Indeed, I do not think that I have tried to intervene since my maiden speech, made in the Budget debate in 1936. But I welcome the proposal to send part of the Finance Bill upstairs.
The hon. Members said that only one in 13 of us would have the opportunity to take part in the Committee debates. But surely a higher proportion never takes part when the Committee stage is on the Floor of the House; the rest of us merely wait for the Division bell. I congratulate the Government on their wisdom in sending the Finance Bill upstairs for its Com

mittee stage, because we must face the fact that in the detailed provisions the discussion becomes one between experts on both sides, which is as it should be. It means that the rest of us will have the opportunity to debate on the Floor of the House matters for which otherwise we could not get time. I have congratulated my right hon. Friend on the boldness of his speech and wish him success. Courageously, he has said it means two years hard slog for our country if we are to win solvency and provide a secure basis upon which we can go forward in economic advance and prosperity.
I want to say something about a matter which it is to be the responsibility of this House to decide. I was sorry to hear my right hon. Friend say that we shall consider a national lottery. I am old fashioned. I am a traditionalist. Perhaps in modern terms I am not "with it". But I find it unworthy that a country like ours should have to take to this undignified method of trying to finance national services. The matter is to be left to a free vote, and I have no doubt which way I shall vote. But I remind hon. Members opposite that this is something in which the Conservative Party played a part in the 1950s. One of our country's great problems which the Conservative Government helped to bring about is the idea that it is better to have something for nothing than a reward for working. It was the Conservative Party which told the country that everything was all right, that we had never had it so good, that we could relax, that everything was wonderful, but all the time the Conservative Government knew that the economy was not sound. I think that the country will respond now when my right hon. Friend says that this is a tough Budget calling for sacrifices. If the sacrifices are fair, he will get the response.
The hon. Member for Wanstead and Woodford accused my right hon. Friend the Chief Secretary of dreariness. The Government, the Labour Party and the House owe a debt of gratitude to my right hon. Friend for the way in which he has served the country in the past few years. Dreariness can often be better than flippancy.
One of the things in the Budget which has concerned me is that the Government should have thought it necessary or desirable or advisable to tamper with the rule


about three waiting days for receiving benefit. I hope that this decision will be reconsidered. The rule has a long history. Those of my generation in the trade union movement will know that for years and years one of the major grievances of trade unionists and workers everywhere was about the three waiting days under the old Workmen's Compensation Acts.
I considered the problem when I became Minister of National Insurance, as did many of my colleagues who wanted to abolish waiting days altogether. Indeed, on the Committee stage of the National Insurance Bill of 1946 I was defeated on this issue. With the help of my advisers, and from my own knowledge and experience, I was able to find a solution to the problem, a solution which has not only lasted since 1946, but has been warmly accepted everywhere. The solution was that payment for the three waiting days should be made re-strospectively, counting the day of the accident, or the first three of disability, sickness, or unemployment if the total period lasted 12 days or more.
I hope that my right hon. Friends will think about this matter again. Their decision will be an irritant. Big demands are to be made on our people and throwing this proposal into the argument is a grave psychological mistake. The proposal will save only a trivial amount and I urge my right hon. Friends not to disturb the present arrangement which has been so successful and which ought not to be thrown back into the pool of controversy. Every trade union conference in the country will have it on its agenda at a time when more important matters ought to be under consideration.
I shall not discuss the details of the Budget. Today is the last time for considering it until the Finance Bill. I hope that tonight the Budget will be approved by an overwhelming majority of hon. Members. But the scene will then shift from the House to the country. With all due respect to all right hon. and hon. Members, it is in the country that the battle for solvency will be won or lost. I want to deal with three or four issues which, after all this high financial discussion, may seem simple, but which in reality are of vital importance. If the Budget is to be made a success, the basic sacrifice will be a sacrifice for the time

being in the standards of living of millions of people, and if the Government are to succeed, then the admosphere in the country and in the workshop must be put right.
To solve our economic problems the Government are relying on what is now called a massive shift of resources towards exports and a restructuring of industry. The words "restructuring of industry" trip lightly over our lips, but I have lived with this all my life and for most of my public life. It is essential that all the Ministries and Ministers concerned should handle it with firmness and resolution and determination, for it it capable of creating difficult human problems and reactions which could destroy the whole purpose of the Budget.
My history has been concerned with the restructuring of an industry in decline. The steel industry is now going through a technological revolution and we have already learned that in my area and elsewhere this restructuring, with its mergers and so on, is creating deep human problems. I beg my right hon. Friends to appreciate that if our salvation depends on the shifting of human resources to the production of exports, we must begin by using those resources which are not now being used. I hope that it will be understood if I say yet again that if we are to win this battle for solvency and eventually for economic growth, it is vital to be able to use the resources now available, as well as those which become available.
I speak of my own area because I know it best, but what I have to say is true of many areas. I am told that over the next few years it is certain that technological development in the steel industry will lead to considerable unemployment. In the end, mergers, mechanisation and greater technical efficiency will lead to greater success for the country and will enable us more easily to face world competition, but the human problems which are now arising and which will continue to arise are very important. I am glad to see my right hon. Friend the Member for Battersea, North (Mr. Jay) in his place. He has wide experience of these problems and has played a major part in dealing with them in the last few years. If workmen feel uncertain about their future, they will not do their best. It


is difficult to get increased productivity and harder work and two years' slog from men always afraid that all it will do is to put them out on the street.
At the core of the problem of wages restraint and the incomes policy and so on is the problem of the lower paid worker. I have had many years' experience of this problem and I have one or two constructive suggestions to make. Since I ceased to be an official trade union officer—although I still keep in close touch—I have noticed two trends in the last years. The first of these has been plant settlement of wage agreements. This trend is increasing, especially in larger plants. I welcome it, but there are disadvantages in it. The second is the arranging of productivity agreements in those larger plants.
In the last few years, as compared with my time in the trade union movement the disparity between the higher and lower paid has increased. Speaking in round terms, when I was a miners' leader and we discussed piece rates and day wage rates we thought in terms of a differential of about 50 per cent. That differential has now grown to 100 per cent., or 200 per cent. With greater mechanisation of industry, the earnings of the piece-worker will rise, but those of the lower-paid workers will not. I urge the Minister of Labour and the Prices and Incomes Board, in considering productivity agreements at plant, to find ways and means by which the lower-paid man can benefit from them.
I read today a report by a committee set up by the Ministry of Labour to consider present practices with regard to overtime. It seems that lower-paid men are asking for overtime and sometimes, human nature being what it is, holding back during a normal shift in order to get overtime. This is very wasteful, but it is their method of increasing their wages. I advise all my trade union friends that if we are to get this increased productivity and make a success of our incomes policy it is essential to give the lower-paid man an interest in increased productivity. It can be done.
If we are to have any income restraint at all it is essential that our policy on prices and dividends shall be tough and effective. Now the battle goes out to our constituencies, to the plants and the shop stewards. The shop steward is one of

the key figures these days, and I hope that the Government will discuss this matter with them. We Members of Parliament should do this too.
We will not succeed unless we have an effective way of dealing with prices and dividends. The urge for increased wages starts in the home. The wife has to use the pay packet and every week it buys less, and there is pressure upon the husband. I support the Budget proposals over dividend restraint and I hope that they will be made effective. I hope that there will be a bigger effort to make our prices policy succeed, because if we do not then we will completely fail.
Everything depends upon my right hon. Friend succeeding. If we cannot win solvency and promote economic growth and expansion, if this effort fails, it may be that we shall be back to other policies far more damaging. I remember being a trade union officer for an industry in which for every man at work there was one waiting outside. People talk to me about fetters, and I read of Liberal Members speaking of the fetters on incomes imposed by the Budget. I would prefer these to the fetters that we suffered in the 'thirties. I say to my trade union friends that everything depends upon our success here.
If I may speak as a layman, when I saw and heard of the gold rush and the Washington talks I was reminded of something I heard years ago and I began to get afraid. I was reminded of something that Harold Laski once said to me. I have heard about the bankers, the gold and all these things in 1931. Laski said that Britain had been defeated only twice in history, once by William Norman and secondly by Montague Norman. I sometimes have nightmares going back to 1931. I hope that hon. Members opposite will remember which party was in power afterwards. It is a sad commentary upon the Western world that in 1968 the livelihood of millions of our people should be at stake because we have not found a sensible way of arranging our international affairs.
Not long ago we joined together to save ourselves from the threat in Europe, and now here we are, when the technological revolution is multiplying our capacity to produce wealth, trying in various ways to choke it down. The


fundamental problem of our generation is, can we in this great system, this semi-capitalistic system, solve this problem? Can we find a way by which man's enormous capacity to produce wealth is controlled by an international system of payments which enables it to be used to the advantage of all the countries with modern industrial technology, and to the advantage of the world?
This may be the biggest challenge, but there is the other story. In the next 25 years a large number of new nations will be reaching independence and will be thinking about developing their economy. Where do they look? To us? Remember that on the other side of the coin, in the closed economy, it seems that there are none of these balance of payment difficulties. Will they follow us or go the other way?
My right hon. Friend has been to Washington and is to have talks in Stockholm about the situation. I was glad that my right hon. Friend the present Home Secretary began these talks to devise an international system for developing our economy. I wish my right hon. Friend well in his endeavours. I wish him well this year, in this very great task he has undertaken for our country, and I hope that success will crown his efforts to establish a sensible international monetary system.

5.28 p.m.

Mr. Selwyn Lloyd: I do not remember the right hon. Member for Llanelly (Mr. James Griffiths) intervening in our Budget debates very frequently, but we are very pleased to have heard him today and to see him in such good form. He raised some pretty broad issues, particularly towards the end of his speech. I am all for improving international liquidity, but the basic thing which the country must do is to manage its own affairs prudently and live within its means, just as a family has to do.
I accept the importance of the issues at stake. One point which the right hon. Gentleman raised earlier, which I was going to mention, was this three days' payment. I cannot quite understand the reasoning behind what at first sight seems a rather mean decision not to pay the first three days after a fortnight's sickness, injury or unemployment. The Chief Secretary seemed to say that it

would be made up to these people in some other way. This is a matter which must be made very clear, and I am not certain whether supplementary benefits would be a satisfactory way of doing it. I have had some experience of the old Workmen's Compensation Acts, and this formula was arrived at after a lot of discussion and negotiation. I should like to be assured that a change for the better is being made.
I begin by paying my compliments to the Chancellor for a remarkable performance last Tuesday. The alarums and excursions of the days before, both domestic and international, must have added to the strain and stress, of which I know something. I congratulate him too upon his stamina and the form of his speech and the attractiveness of the presentation. I particularly congratulate him upon his handling of his own supporters. Most of them, not all, cheered rapturously at the end of his speech. That was his most notable achievement, for if a Conservative Chancellor, in similar circumstances, had made an identical speech, I suspect that he would have been shouted down by hon. Members opposite. Realisation of that fact and its implications will gradually sink in to the party opposite.
I am subject to considerable temptations today which I will do my best to resist. I had thought at one time of making a speech very critical of the Budget, consisting entirely of quotations from the past speeches of the Chancellor of the Exchequer. He used not to be backward in giving us advice on these matters. There was his contempt for restrictions on demand at home as a means for dealing with the balance of payments. There was his doubt about whether stagnating home demand automatically produced increased exports. There was his accusation that I was obsessed by the prospect of wage increases of 4 and 5 per cent. There was his talk in 1963 about the amount of slack in the economy and the need for a 7, 8 or 9 per cent. growth. He doubted in 1963 whether the Budget was sufficiently reflationary. In 1964 he talked about not snuffing out the boom. That is a remark to remember in view of what has been said more recently about 1964.
However, I will resist the temptation—[HON. MEMBERS: "Oh."]—I could have yielded to it at much greater length, but


I wish to make this general comment. Now that the Chancellor's turn has come, he has almost completely rejected his own advice of former years, and for that I give him credit. Since I have been provoked by hon. Members opposite, let me give an example. I remember the right hon. Gentleman, in April, 1961, pouring scorn on the priorities of my predecessor as Chancellor of the Exchequer, Lord Amory. They were, as stated by Lord Amory in a speech quoted by the present Chancellor of the Exchequer, first, to keep sterling strong and respected; secondly, to keep the cost of living and the costs of production stable; thirdly, to encourage investment in productive industry; fourthly—and only fourthly—to encourage further growth in our living standards and an expansion of the economy generally at a pace consistent with our success in achieving the first three aims.
In the Budget debate of April, 1961, the present Chancellor of the Exchequer then said that that was all wrong and that there needed to be an entirely different approach. He repeated it next year, in 1962, saying again that Lord Amory had got it all wrong. I fail to discern any difference between Lord Amory's priorities and the Chancellor's present proposals. For that, I give him credit.
I have consistently said that we should tax spendings and not earnings. When in 1962 I put a tax on sweets and soft drinks and increased the lowest range of Purchase Tax, those on the Labour benches could not contain themselves for indignation. I was told that I was taxing the kids' lollipops, and that was the supreme achievement of my Budget. I was told that sweets were a substitute for smoking and that it was anti-social to tax them. It was said that I had not any sympathy with the children. The right hon. Member for Sowerby (Mr. Houghton) said concerning my proposals on Purchase Tax that I was stepping up
the tax on the essential things, particularly clothing, footwear and furniture, and it is to this that we take exception.
The present Minister of Transport—and this is almost the best quotation of all—said:
It is really rather incredible that at this time, when the Government are trying to enforce an incomes policy of wage restraint,

they should in so many directions be giving a greater encouragement to the rise in the cost of living by imposing through this Budget tax upon the essentials of life.
Mrs. Slater, one of my vocal critics, said:
It is thoroughly unjust to put up the tax
that was, Purchase Tax—
from 5 per cent. to 10 per cent., and to do so is indicative of the Tory approach to the problems of the people whose need is still great today."—[OFFICIAL REPORT, 16th May, 1962; Vol. 659, cc. 1387, 1396, 1435.]
The Secretary of State for Scotland, as some would expect, was very withering in his winding-up speech.
I put a tax of 15 per cent. on sweets and raised the lowest rate of Purchase Tax to 10 per cent. The Chancellor, in this Budget, has put up the tax on sweets to 20 per cent. and brought up the lowest rate of Purchase Tax to 12½ per cent. I will enjoy watching my critics supporting him in this action. I give the right hon. Gentleman credit for accepting the proposition that spendings and not earnings should be taxed.
In 1961, I gave a Surtax concession on earned incomes, paid for out of an increased tax on profits, to provide incentives for industrial and business executives and professional people. Tears of emotion streamed down the cheeks of hon. Members opposite as they denounced me for perpetrating an act of social injustice. The argument for any relief of Surtax was "phoney", said the Chief Secretary. Prescription charges got mixed up in the argument, and that made my action even more immoral, so it was said.
In this Budget, so far from withdrawing any concession of mine, the Chancellor of the Exchequer has exempted the Income Tax payer and the payer of Surtax on earned income, so far as those taxes are concerned, from any part of these heavy added burdens. In my view, he was right, and I give him credit for that.
The Chancellor, in his Budget speech, also said one or two sensible things. He referred to the inhibitions upon the active management of portfolios of foreign securities provided by what he called the 25 per cent. scheme and he indicated his readiness to consider sensible modifications. He referred to the increase in profits needed to get the spurt in company investment for which he asks


essential to our future efficiency. He said that it might be possible and desirable to reduce the highest rates of tax on incomes, but that he could not do it this year. For all this, I give him credit, although I wish to take up one point with him concerning spurts in company investment. It concerns the family business or closed company.
I visited such a company not long ago. It started about ten years ago with a comparatively small capital. It had grown 10 per cent. each year, and the profits were ploughed back each time. It now has about 1,000 employees and five units of production. It was just breaking into export markets in children's shirtings, which are not an easy commodity for us to sell overseas. All this could be done because it had not paid dividends. The money had gone back into the company. It seems monstrous to say that the expansion of this business should be retarded because it must distribute 60 per cent. in dividends. At all events, it cannot get a decision from the inspector of taxes about what it should do. The matter has been held over now for two years and the company does not know what its tax position will be. I hope that the Inland Revenue will not insist on a distribution in a case like that and will come to a quick decision. This is a specific case which has been put to me in the last fortnight.
I have now come to the end of the credits. My next point concerns the tax on investment income. It may be necessary to placate the Left wing, but it cannot, by any stretch of the imagination, be considered as an incentive to saving. It is an invitation to people to run down their assets and spend their savings. That cannot be a good thing. It should be remembered that £3,000 a year at 6 per cent. is the income on £50,000. That sounds a large sum. On 1935 values, it is £750 on savings of £12,500. Not even the Opposition in those days would have considered that that was a rate at which penal taxation should begin. This shows the changes in the value of money.

Mr. Stanley Orme: It was a long time ago.

Mr. Selwyn Lloyd: I repeat that I do not think that 30 years ago those sort of sums would have been thought, even by

the then Opposition, to justify their being the starting point of penal taxation.
Clarification is needed about the provisions relating to the income of minors. The retrospective element in the way in which the Chancellor has lengthened the period for gifts to be free from death duties from five to seven years needs close examination. These matters can be dealt with in Committee. It is a pity that it will not be a Committee of the whole House. These matters are as important as most of the matters which we debate on the Floor of the House.
I wish now to deal with two specific matters. I deal, first, with the Selective Employment Tax and the proposed increase in it. This is a controversial tax and there is a lot of opposition to it on both sides of the House. Many think that it is a discredited tax, for three main reasons. First, it is extremely cumbersome to collect. The Chancellor of the Exchequer admitted this, but said that it was cheap. Is it all that cheap? The Ministry of Social Security collects it. The Ministry of Labour decides on disputed liability, and there is provision for appeal. The Ministry of Social Security makes certain refunds. The Ministry of Agriculture makes other refunds to farmers, forestry employees and horticulturists in England and Wales, and the Secretary of State for Scotland does the same in Scotland. The Ministry of Labour makes refunds for those in the fishing industry. Refunds to local authorities are handled by other Departments and to the nationalised industries by the sponsoring Ministries. There must be a great deal of interdepartmental work involved. Apart from that, there is the cost to private firms and individuals of keeping the records and the like. I ask the right hon. Gentleman, if he did not hear it or has not read it, to read the speech of his hon. Friend the Member for Willesden, West (Mr. Pavitt) last Tuesday. That is the first thing. The tax is cumbersome to collect.
It is also a mistake to think that an arbitrary line can be drawn between manufacturing and service industry, the one being beneficial and the other to be discouraged. For example, the tourist trade, which is hard hit, is one of our best foreign currency earners. Another example is the task of those who produce


invisible exports, of which the President of the Board of Trade spoke so glowingly on Wednesday. His description was that their wide-ranging activities were too often unnoticed. Banks, the merchant banks, insurance companies, export agencies and others are hard hit by this tax.
Then there is the third point that manufacturing industry itself depends to a considerable extent on services. That is the reason for giving it the premium, which has now been removed except in development areas. All sorts of distortions are produced by the tax. In addition, it is odd that the Chancellor should increase the tax at the same time as he announces the setting up of an inquiry under Mr. Reddaway to look into the effects of the tax and to decide, presumably, whether it should continue or what changes should be made. That is putting the cart before the horse.
The Chancellor's key argument seems to me to be that the heavy burden of S.E.T. on, for example, the construction industries has an effect on productivity. That argument, if well founded, seems to me to be an argument not for selectivity, but for universality. If it has the effect of reducing the cost of production, surely that is something which should apply to everyone. If the argument concerning the construction industry, on which the country depends so much for development, is valid, it should be valid for other industries. This action by the Chancellor is a major blemish in his Budget.
The second but rather different matter with which I want to deal is the question of an incomes policy, illuminated, as always, by Mr. David Wood's article in The Times today. It is an extremely difficult problem. I think that I was one of the first to use the phrase in this House. Before, it was "wages policy", but the phrase has become as long as a piece of string, meaning quite different things to different people.
My view was, and is, that any Government must have a view and a policy on incomes. The Government employ so many people themselves and can influence the remuneration of so many others in public employment that they must have a view. In a speech which I made in December, 1961, I tried to define what I

thought were the ingredients of such a policy. The object is to secure a realistic relationship between increases in incomes and increases in production. I do not think that the Government can stand aside, although they should not impose their view.
There has to be a process of education about the economic facts of the day. The Government should supply information, influence and persuade people in the light of those facts to be reasonable. By "people" I mean employers and trade union officials, those responsible for conducting wage negotiations, arbitrators, those responsible for fixing prices, profits, dividends and the rest. They should all be influenced by the facts of the current economic situation. I never meant that the Government should decide how much particular groups should be paid year by year.
Obviously, such a policy on incomes is not the be-all and end-all. It cannot be a panacea. It cannot be more than a factor in the situation. There are many others: labour relations, business training, tariffs, restrictive practices and monopolies. All those matters which affect productivity are equally important. Above all, however, the Government's duty is to keep the economic climate right and a proper balance between supply and demand.
There are legitimate differences of opinion on both sides of the House as to the extent of the influence of such a policy. I think that it is worth trying. It is an element in the situation. Nor was it all that unsuccessful in 1961 and 1962. I have given the figures to the House before. There is, however, all the difference in the world between that conception and a statutory or compulsory policy. I have always been opposed to the latter.
Some hon. Members in this debate have discussed the idea of a total statutory freeze. Instituted for six months after a period of boom, it might work if it were applied to everything. Perhaps that would have been a better thing to do in 1961. I can imagine the fury with which such a proposal would have been received. I am certain, however, that such a freeze would not work now after three and a half years of stagnation and after the Budget and the other burdens of devaluation which will gradually be felt. A total


freeze would be intolerable, unenforceable and a call to disruptive strike action.
The question then arises whether the plan for a compulsory 3½ per cent. will succeed. Has it any better chance of success? I do not think that it will work in practice. I think that a great deal of ingenuity will be used to get round it from, for example, the simple case of the two young ladies referred to in the Financial Times today who simply resigned their jobs, applied for one an-other's at increased salaries and got them.
There will be more refined methods of getting round it. Then there are basic difficulties about plant agreements. What is more, it is a psychological mistake. The British people have been well and truly clobbered in the Budget. We are a strange masochistic nation. We do not mind misfortune if we are handled right. We have certainly been clobbered, but a compulsory incomes policy on which the Government pin such extreme hopes is not the right way to handle us. I believe that, coupled with other necessary measures an invitation to be reasonable in a situation of grim national need would, after devaluation, after the Budget, have more effect, with all the caveats and reservations about such appeals in the past and about those who would have to make the appeal today.
In any event, I do not think that 3½ per cent. is a realistic figure. Five per cent. would be much nearer the mark. I believe that, curiously enough, there would be a better chance of achieving that by voluntary means, with the great added advantage of avoiding the frictions of compulsion, which may gravely affect production. I will not go into them in detail, because hon. Members on both sides know exactly those to which I am referring.
I admit at once that this is a difficult judgment to make. It is a staggeringly difficult judgment to make and one in which one cannot know for certain whether one is right or wrong. In my opinion, however, the Government's policy will not work and I think that it is a psychological mistake.
In addition, I share all the fears already expressed about the future of free collective bargaining. I forget whether the quotation from what the Prime Minister said on 10th March, 1966,

has been used in these debates. He said on that occasion:
Once you have a law prescribing wages, I think you are on a very slippery slope.
That is the situation.
What is more, the functions of the Prices and Incomes Board have grown out of all proportion to what was intended. I had something to do with the formation of the National Incomes Commission. The idea then was to have a body to examine settlements which had already been made, to see whether they were excessive in one way or another, a post-mortem rôle to be used sparingly when settlements were made which appeared either to be setting a bad example or to be damaging to what is called the national interest. That was one function.
Another function, and one of the Commission's main tasks, was to get away from all those ad hoc commissions Guillebaud, Franks and the rest—for examining particular cases without any continuity between the several examinations. The idea was to have one body handling the examination of all special cases which the Government put to it. I do not think that anyone thought that it would have the wide Powers now being thrust upon it by the Government. That is my second major caveat about the Budget.
Finally—I will spare the House my views on international liquidity and Government spending, important though those topics are—I come to the question of "over-kill". Has the Chancellor been too severe all round? There are risks in the severity of his measures. The fact is, however—and it must be faced—that it is much more expensive and much more burdensome for a Labour Chancellor to restore confidence. In 1961, when sterling was last under serious pressure, when we were in power, the situation was restored much more quickly and comparatively easily. It certainly in these circumstances will be a hard and difficult task. I personally wish any Chancellor of any party well in endeavouring to do what is in the interests of us all. My conclusion, however, is that although this Budget has some merits, nevertheless, because of the mismanagement of this Government over the last three and a half years, there is little cause for optimism.

5.50 p.m.

Mr. Douglas Jay: I thought that the comments of the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) on the Chancellor were a good deal more perceptive than those of his hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin). I also thought that his quotations were a good deal more interesting, but he was, of course, speaking from much bitter experience. However, nothing that either the right hon. and learned Gentleman or the hon. Gentleman or anyone else said, indeed nothing said by anybody on that side of the House in this debate, so far seems to me to offer any serious alternative to the Chancellor's Budget strategy, and no one else has told us what Government expenditure the Tory Party would cut, what taxes it would raise, or just what sort of income policy it would pursue.
I believe that my right hon. Friend the Chancellor—and here, apparently, I agree with the right hon. and learned Gentleman—was right to put his total of extra taxation on the high side, thus in effect to provide for contingencies. We have had quite enough contingencies over the last five or ten years and under other Governments, too. But if it turns out that the Chancellor has gone too far I hope he will in these circumstances have the courage to relax, because nothing is gained by keeping unemployment at over 2 per cent. for its own sake, and if the Chancellor should find it necessary to relax I personally hope that the first tax he will cut will be the S.E.T. I have a feeling that any proposal to reduce S.E.T. would not meet with very serious opposition from either side in this House.
Secondly, given that it was necessary to check spending on this scale, I also believe that the Chancellor was right this year to put the main weight of the extra burden on the indirect taxes, and also to do it selectively with the main emphasis on drink, tobacco, gambling, and what one might call motor taxation. These taxes are not really regressive in the same sense as the older indirect taxes or, indeed, general taxes on food, clothes, and all commodities whatever. Also, oil and motor taxation has I think a great extra advantage in that it checks what are very expensive imports and it also

does something to restrain congestion an the roads and heavy road spending.
Though that is true for this year, however, I hope the Chancellor is not going to push this argument too far and will not join those who want to see a massive shift from direct to indirect taxation. When my right hon. Friend, quite rightly, said that all our indirect taxes today are not as regressive as some of the older ones used to be, and that Income Tax no longer falls only on the rich, he forgot to add that, even so, Income Tax today is much more progressive than are indirect taxes. One might well infer, and I do infer, from the Chancellor's doctrine here that the right next step in direct taxation should be to raise the exemption level for Income Tax, which is now extremely low. Above all, I hope that in indirect taxation the Government and the Chancellor will set their faces resolutely against the Tory policy of imposing import levies on foodstuffs—which is the one practical suggestion in the whole field of economic policy which I have noted from the party opposite. With our present incomes policy problems and balance of payments problems any such policy would be an act of insanity. I am reassured here by the fact that the Chancellor himself—and this is the one quotation from the present Chancellor which I would make—said at a Press conference at Transport House during the General Election of 1966.
I have always regarded the agricultural policy of the Common Market as the least attractive of the Community's faces.
I hope that represents his view of import levies on foods.
However, in passing, if there are any, and there may be some on this side of the House, who think the Chancellor has gone too far in raising indirect taxes this year, they may be surprised to learn, possibly even the Chief Secretary may be surpised to learn, that whereas last year the total of Customs and Excise and motor vehicle duties exceeded the total revenue from Income Tax by as much as £150 million, this year the total revenue from Customs and Excise and motor duties hardly exceeds the revenue from Income Tax at all. Thus Income Tax has actually caught up with revenue from indirect taxation even with the Chancellor's increases. That is, of course, largely because with rising money incomes our


Income Tax does not have to be raised, it virtually raises itself, as I am sure the Chief Secretary very well realises.
Income Tax revenue has also increased due to the Chancellor's manoeuvres over the family allowances and the child allowances. What I understand him to have done—perhaps we could have some confirmation of this—is to have taken away in tax allowances from the richer taxpayers with children as much as but no more than they receive in extra family allowance payments. If that is what has happened, I think that it is defensible; but what would not, I believe, be defensible would be to pay higher family allowances for the poorer families with children at the expense purely of richer taxpayers with children and not at all at the expense of the richer taxpayer without children. I never could see why richer taxpayers without children should go free in this operation.
The rest of the money ought to come from general taxation.—[Interruption.] I am laying down a general proposition, Nevertheless, I think it is right that it should come from general taxation. I join with those who cannot see the logic or justice of raising this revenue by discontinuing the payment for the first three days of sickness, injury or unemployment. Indeed, it seems to me particularly illogical, because the saving in this case accrues to the National Insurance Fund, which has really nothing to do with it. I would have preferred to raise the necessary money by a greater increase on petrol tax, rather than by this move. If my arithmetic is right, another penny on petrol would give us as much money.
I also warmly welcome the Chancellor's anti-avoidance reforms, particularly, with all respect to the right hon. and learned Gentleman the Member for Wirral, the ending of the cessation privileges of lawyers and some others. I only wish that my right hon. Friend had also ended the 45 per cent. Estate Duty rebate for agricultural land and some other forms of property. I specially welcome the cessation reform, having tried in vain for four years myself to persuade Sir Stafford Cripps to introduce it. This reform indeed is one respect in which I would say that this Budget is superior to the Budget of 1948, which it otherwise resembles remarkably closely, notably in

the special contribution. The 1948 Budget had a notably beneficial effect on the balance of payments, so perhaps there is a very good augury here.

Mr. Reginald Maudling: Was not that special charge also called "once-for-all"?

Mr. Jay: I was just about to say—the right hon. Gentleman has great prescience—that the present Chancellor has shown that something "once-for-all" may be repeated at least every 20 years.
If we are to have a firm and fair incomes policy—and that seems to be the general view of the House—then it was I believe, absolutely necessary to include both this special charge and a statutory dividend control in this Budget. Having done both, I believe that the Chancellor is justified in asking support for a firm incomes policy, though I hope that we shall have some of the details of it more clearly explained than we have so far. I am grateful to my right hon. Friend the Chief Secretary for his explanation today of the dividend part of the policy, but we still need more illumination on the subject of wages.
If the Government are really sincere in putting balance of payments recovery above all else, as my right hon. Friend the Chancellor said about eight times in the course of his Budget statement, I hope that they will draw two further conclusions. The first is that devaluation in itself is not enough to get the needed upsurge in exports or the check to imports. After all, we did not devalue very much this time. We must keep up the positive drive for export promotion and import saving, and I should like to hear still more of what new help we shall get this year from the E.C.G.D. and from the British National Export Council, both of which have already achieved a great deal, and from the new Overseas Marketing Corporation, which I believe has considerable promise. For devaluation is only a condition of success. It is not a panacea.
The second conclusion may be less welcome to the Chief Secretary. If the Chancellor is so keen on balance of payments recovery above all else and wants two years' hard sacrifice for it, I trust that he will now have the sense and courage to stop trying, even in those two


years, to join the E.E.C. on terms which would add £700 or £800 million to the wrong side of our balance of payments. To try and cripple ourselves in that way would be foolish, even if it was possible, but to go on trying now when it is manifestly impossible seems to border on madness.
I think that the Chancellor's sincerity in asking for sacrifices for the sake of the balance of payments will be judged by his candour in admitting this obvious fact. Now that the Kennedy Round has been completed, there may be other possibilities offering to us for opening up wider export markets on a far larger scale than Western Europe alone and doing so in ways which will help our balance of payments rather than harm them. Last May, my right hon. Friend the Prime Minister promised to explore such possibilities if the E.E.C. application should be dropped. Now that we have a new Foreign Secretary perhaps we may also, for that reason, have some new thinking on the whole subject.
In my view, it is not sufficient for the Prime Minister to argue, as he did at Question time last week, that the Government studied the possibilities of a wider Atlantic free trade area a year ago. The difficulties in the way of the idea then were found to be political much more than economic. Since then, not merely has the way into E.E.C. been blocked, but the United States Government recently announced that they are studying these wider possibilities. In that case, we should at least have the initiative to do the same as the American Government in the new situation, and not allow French obstruction to paralyse British policy indefinitely. Otherwise, shall we have to wait three months, three years, ten years, or how long? To wait indefinitely in a state of paralysis will not help our balance of payments, as the Chancellor professes that he wants to do. As long as there is an almost total inconsistency between the Government's international trading policy and their balance of payments policy, the public, and the wage earner in particular, cannot be expected to give the Chancellor that wholehearted support which would otherwise, I hope, be forthcoming.

6.5 p.m.

Mr. Hugh Fraser: I am delighted to have the sympathy of

the right hon. Member for Battersea, North (Mr. Jay) on the subject of large families and personal taxation. I also join with him in pressing the Government to carry out a feasibility study of a N.A.F.T.A. or a potential trade organisation outside the E.E.C.
I, too, congratulate the Chancellor on the actual production of his Budget. He has been loaded with various sobriquets, such as "Up Jenkins", "Strength through Roy Jenkins" and so on. I hope that he will accept mine, which is simply "Rob Roy", because he proposes to rob every section of the community.
With respect to the right hon. Gentleman, however, I do not particularly blame him for the size of the burglary. The criminal I blame for the size of the imposition of tax is the Prime Minister, who failed to devalue the £ for at least a year when he should have done so. I say that as one who advocated devaluation of the £ as early as July, 1966, so I make my accusation with a clear conscience. The failure to either devalue or deflate is the root cause of this immense burden of taxation.
As a result, one of the questions which must face the Chancellor and the whole country is whether, in these circumstances, his policy will work, and that is a question to which I want to address my remarks. After all, it is the key to whether or not this Budget will be a success. It has been made clear by the Chancellor and the Financial Secretary in their speeches, and it was also made clear in the moving speech by the right hon. Member for Llanelly (Mr. James Griffiths) that this falls into two parts. First of all, there is the Budget itself, and then there are our external financial relationships.
There are two problems in relation to the Budget. The first is whether the savageness of taxation will not lead to a massive disinvestment by the general public, which could be very serious. The second is the whole question of incomes policy which, in my view, has been put forward too late, because it should have come forward with an earlier devaluation when it would have made more sense. However, the die is now cast. Events will show how these matters work out, and they will be discussed in great detail by all parties when we come to the Finance Bill.
I turn now to the other side of the question, which is how this export oriented Budget will be made to work. It depends on two absolute necessities. The first is that the world market should be in a position over the next 18 months to receive something like £1,000 million more of British exports. The second is that the exchange and monetary system of the world should be in order and credible to the mass of traders throughout the world. If these two conditions are not fulfilled, all that the Chancellor will have organised is the biggest export-led slump in British history.
It is for those reasons that I want to tread now into the rather tricky ground which was referred to at considerable length by the Financial Secretary on Wednesday and which was quite properly referred to by the Chancellor when he produced his Budget. I refer, of course, to the world monetary situation.
May I recall to the House the conditions for the production of the Budget in the days preceding it? On Friday morning, there had been such a run on the reserve currency that the banks had to be closed to avoid the risk of a further devaluation. Yet by the following Thursday the right hon. Gentleman saw fit to reduce Bank Rate by ½ per cent.

Mr. Jay: The right hon. Gentleman will no doubt agree that this was done mainly to help the United States authorities, rather than to prevent another devaluation of sterling.

Mr. Fraser: Perhaps they can come to the same thing. If the £ is riding on the back of the dollar, which until this Budget it was, it is a question of people transferring their £s into dollars and then into gold and making a profit in that fashion. The initiative undoubtedly came from here and not from the United States. Be that as it may, we live in troubled times for this to be able to happen.
This is the main point to which I wish to address my remarks. It was rather dangerous for the Financial Secretary to talk on Wednesday night in a sense almost of euphoria about how good and right things were. I do not believe that now all is well. It is not. This is the fact which the House and the country should face. I know that the Financial

Secretary was keeping very distinguished company in Washington over that weekend, but let the House remember the nonsense the bankers made the week before in Basle. If war is too serious a matter for generals, the world economy is far too serious a matter for central bankers. We have bought time by these various manoeuvres, and not too much time either.
No series of swap arrangements can any longer conceal the fact that the gold exchange standard, after 20 years of unparalleled prosperity for the West, is nearly breaking down. The reason is not too complicated. The amalgam of world reserves—reserves £s, reserve dollars and gold—is monetarily and chemically unstable. Unless value/weights are approximate, the whole is in danger of disintegration, if not of explosion.
I will put it in another way. If reserve currencies permanently run deficits—the United States this year is running a deficit at a current rate of nearly 6 billion dollars, with inflation in the United States running at the rate of 4 per cent., and even the United States current balance of trade, for the first time for many years, in danger—it does not need a genius to start a rush out of dollars into bullion, which has not been revalued since 1934.
When talking about the gold rush, in my view it is as absurd to get emotional about Charles de Gaulle as about Charlie Chaplin. The world today is in revolt against paper money printed by politicians to meet, not international responsibilities, but national political problems. Until credibility is restored for the world's economic system, human beings and human governments will seek to safeguard their wealth, to ignore the dictates of prudence, is to march down the road of the wildest speculation.
In his Budget speech the Chancellor made considerable reference to his forthcoming visit to Stockholm. I only hope that he can preserve an icy calm and apparent absence of prejudice and walk as delicately as Agag at this meeting. Here he will begin the marathon, not just of saving the Budget—because, if the economic system gets into real trouble, the Budget and all else will fail—but of helping to save the present world system.
The right hon. Gentleman is the first Socialist Chancellor of the Exchequer


who can strike an attitude at the International Monetary Fund, because, whatever the reasons, he has at least produced a courageous, though I think thoroughly objectionable, Budget. However, he is in a position for once, for the first time in three years, to be able to say something of importance at this meeting.
I believe that the test, as Mr. Samuel Brittan, the financial editor of the Financial Times, wrote a few days ago, of all these conferences, of which this may well he the first, is
not whether any conference maintains any exchange rate, gold price, or monetary system, but whether it maintains world prosperity.
This is the issue before us.
One thing I believe to be true. Whatever the central bankers or the Financial Secretary may say, I believe that the two-tier system for gold cannot be very long maintained. The United States and the dollar are entering a very rough summer indeed. Riot or commotion, an extension of the Vietnam war, even a failure to redress the United States balance of payments—it will be extraordinarily difficult for the United States to do that; despite the speeches by right hon. and hon. Members learned in these matters, I see no sign of it yet—all these things, and things which could happen in Britain, could easily lead to further massive movements out of paper currency and a totally disordered increase in the price of gold.
I very much hope, therefore, that the importance and the possibilities of the Stockholm meeting will not be exaggerated. The one thing the world is frightened of, and the one thing that politicians should at all costs avoid doing, is the building up of illusions. It is a great error at this stage for too much stress to be laid on the possibilities of what can come out of the Stockholm conference or out of the special drawing rights.
I shall not weary the House by going over the whole problem of special drawing rights. There are Members who are much more expert than I in this matter and who are much more familiar with what went on at the Rio conference. They will know how this matter was started by my right hon. Friend the Member for Barnet (Mr. Maudling), progressed through Lancaster House, and eventually came out of the Rio confer

ence. It is presumably what will come out again from the Stockholm conference. The sorts of sums, the conditions which are hedged round, the dates by which certain things can become available, are not yet of sufficient importance for us to believe that the conference can save the situation.
Even if the sums involved were to be trebled from what was proposed at Rio, and even if the legislation were rushed through, instead of our waiting for 1969, it would generate for this country annually only between £120 million and £180 million more credit. This is the sort of sum which during the last six months has been lost across the exchanges in one single afternoon. I am afraid to put too much hope in this. It may be a valuable first step, but to put too much hope in this system is akin to putting too much confidence in a bank clerk armed with an unaudited ledger being able to stop a stampede of elephants.
Something much more serious than what is on the agenda now is needed at the Stockholm conference to restore world confidence and to prevent countries embarking on self-protective programmes of international restrictions. Here I congratulate the President of the Board of Trade who has suggested an advancement of the Kennedy Round. I congratulate, too, the German Chancellor, and M. Debre, of France, who have made the same sort of suggestion. These are steps in the right direction.
What is necessary now is to avoid a conflict between two schools. This is not a recommendation of cowardice, but one of statesmanship. I see that there are strong arguments for both. I believe that we are faced with decisions along two main lines—either a move towards the demonetisation of gold, or towards the enhancement of its monetary value. These arguments are nicely balanced. They both have one claim, that they would do away with speculation.
I know that gold is totally barbaric, but, Mr. Speaker, if you in your benevolence were to arrange for gold sovereign pieces, and 20-dollar bills, to be showered on this assembly, in equal quantities, I know which I would go for. I would go for the dollar bills, because right hon. and hon. Members would be fighting for the gold pieces.
I think that it would be an error, and it would also be impossible, now that five years have passed since the Brooking Report, for the United States to try to carry out the demonetisation of gold. I believe that this would not be in our interests, or in the interests of world trade. It would split the world into two blocs. It would mean that the dollar would inevitably be devalued, a host of currencies would become unconvertible, and trade barriers would mushroom. I believe that the dilemma for Britain and sterling would become impossible. I only hope that in a fit of Francophobia Britain will not line up with a piqued and almost demented United States Administration in any such act of folly—which could only make Britain the financial vassal and economic Vietnam of the United States.
Against the simple economic touchstone of expansion, and the avoidance of a world recession, the argument for an increase in the price of gold is more logical. Leaving speculators, generals, Russians, South Africans, Indian peasants, and other horrific enemies of society out of the picture, this would possibly be advantageous to this country. Compared with the problems of world recession, the problems of dealing with potential inflation are much easier to manage. For all its problems, it must be in Britain's interests to lean more towards a system based on the impartiality of gold, than towards one founded on the unpredictable nostrums of Washington politicians. One system is credible, the other is not.
Nevertheless, I hope that at Stockholm the Chancellor of the Exchequer will be able to avoid a fight and a direct confrontation between those two principles. I do not believe that the world is prepared for it to be, but I believe also that there is a chance of the right hon. Gentleman exercising statesmanship. The present terms of reference, either of an ameliorated gold exchange standard, still based on reserve currencies, or of a pure gold standard, cannot provide a workable or an immediately acceptable political solution. I believe that a solution can, and must, be found, and I believe that the right hon. Gentleman is now a sufficient statesman to side, if need be, with the French Minister of Finance in advocating a wider and more profound world

economic conference to seek solutions which will be fair, lasting, credible, and acceptable to all reasonable men.

6.25 p.m.

Mr. Charles Pannell: Any Budget must be seen in the context of the national and international situation, and the same is true of a speech. That is why I congratulate the right hon. Member for Stafford and Stone (Mr. Hugh Fraser). His speech was especially relevant to the present situation.
I do not think that it makes a great deal of sense to quote what Sir Stafford Cripps said in 1948, or what the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) said in 1961. It is sufficient for either of those two ex-Chancellors, or the present one, to do the right thing as he sees it at the time. One of the weaknesses of this place in a rapidly changing situation is the way in which we bandy old words about the Chamber, and, if I may say so with respect to you, Mr. Speaker, it is equally ridiculous that we are sometimes bound by precedents established 150 years ago.
The right hon. Member for Stafford and Stone is a devaluationist, and always has been. Everybody seems to be a devaluationist now. The right hon. Gentleman said that the real problem with this Government, and particularly the Prime Minister, was that they failed to devalue the £ at least a year earlier. He asked what would have been the climate then, and answered his question by saying that it would have made more sense at that time. The right hon. Gentleman is very much at variance with both the Leader of the Opposition, and the right hon. Member for Enfield, West (Mr. Iain Macleod).

Mr. Hugh Fraser: And with the Prime Minister.

Mr. Pannell: All right. It is enough for me to deal with my traditional enemies, without leading assaults on my friends.
I think that the story goes back to the weekend before last. The right hon. Gentleman referred to the Friday morning. Then, it was not only that my right hon. Friend the Member for Belper (Mr. George Brown) was upset and blew up, but there was a chill going round the Chamber, and through the corridors of


the House. I remember it as one of the really traumatic nights that I have spent in this place. The really exciting moments in history often come when we look back on things and remember them in retrospect. The only occasion which I can remember of comparable excitement was when General MacArthur was going to drop the bomb north of the Yalu River, and Prime Minister Attlee flew to America to talk to Harry Truman in what the President described as the most adult conversation he had ever had. On that occasion it was a question of peace or war.
To me a Budget is interesting only as a financial system as long as it leads to a classless society, and a warless world, by which I mean people have an ever-improving standard of living. I like to tinge justice with memory in all these matters. I look back to 1931, when there was a real crisis, which for me was two years unemployment. But let us remember the situation then, since one would think that the Conservatives were always the arbiters of progress and we were the architects of disaster. But Philip Snowden said in his memoirs that when he was going into the Treasury in 1929, and Churchill was coming out, Churchill told him, "I haven't left a penny in the till, Philip,"—and he had not.
Nothing is credible in politics except the economy and everything which we give—whether social services or overseas aid—comes only from a plenitude provided by the people of this country; without a dynamic economy, all the rest is so much nonsense. That is why I would not be prepared to die in the last ditch for peripheral benefits like, for example, prescription charges, even for services to which I have devoted a lifetime. To use an aphorism which I think the right hon. Member for Stafford and Stone would recognise, I would quote the Papal injunction, "Of all evils, choose the least".
I want to come back to what was said by the right hon. Member. On that night, the first reaction of the Leader of the Opposition was to say:
The events which we have seen in the last few days are in fact some of the consequences of the devaluation of the pound…".—[OFFICIAL REPORT, 15th March, 1968; Vol. 760, c. 1856.]
The fact that, at a time when people were having a Bank Holiday forced on

them and there was a crisis in the gold markets, he could have brought up that kind of piffling party point wrote him down to the stature which we all know he has. What he said has not gone down too well. Only the sycophants on the other side of the House have quoted it. Other people's minds have been on more important things.
But the right hon. Member for Enfield, West (Mr. Iain Macleod) was anxious to do his stint for his leader and he tried to justify that remark last week. In column 431, he quoted, very much out of context, the words used by the Secretary to the American Treasury, Mr. Fowler:
The dollar is now in the firing line.
He then quoted the Quarterly Bulletin of the Bank of England, which was not entirely relevant.
I interrupted the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) to say what the first reaction of the United States was. They did not ally themselves with the Leader of the Opposition or put that gloss on it. Their first view was stated as follows:
The United States see the devaluation of the British pound as ' a healthy and constructive development' within the framework of the international monetary system.
I could have quoted a great deal of them, but the whole hand-out, which is fairly lengthy, was generally on these lines. It was with something of relief that the United States greeted devaluation.
I have with me a copy of what was said at the Press conference at which Mr. Fowler used the words quoted by the right hon. Member for Enfield, West. But they came in the give and take of questioning and he merely stated the unquestioned fact that, being the weaker currency, sterling naturally had to go down before the dollar—but the assault was on all along the line. I have been fascinated by this statement of the Leader of the Opposition, I have had the Library examine every reference in the United States to this—in spite of what the hon. Member for Wanstead and Woodford said, with a great deal of hindsight, about his many discussions in Washington. Those people were probably only trying to rationalise his prejudices.
But in its edition of Saturday and Sunday, 16th and 17th March, the Herald-Tribune, which is an authentic voice of


American opinion, had this to say about the gold crisis:
As for the gold crisis, it was the Vietnam struggle, with its drain on American resources and the domestic unrest it helped engender, that both awakened doubts as to the stability of the dollar and hampered the President in his efforts to get a stabilising program through Congress. The surtax he asked for has been denied him; even the removal of the gold cover from the dollar was delayed until crisis point had been reached on the world gold markets—and then was passed by the Senate narrowly and grudgingly.
In effect, whatever the first reaction of the Leader of the Opposition may have been, to score a party point, that view has not been echoed right across qualitative American financial opinion. In view of the troubles for the American President, beset as he is at present, if there had been any other alibis except these, voice would have been given to them—

Mr. Terence L. Higgins: Was the right hon. Gentleman quoting from the Paris edition of the New York Herald-Tribune?

Mr. Pannell: It was from the International Herald-Tribune, published with the New York Times and the Washington Post, page 4, Saturday and Sunday 16th and 17th March. I do not quite see the relevance of that interruption. Perhaps I am not as sophisticated in these fiduciary matters as the hon. Member, but if there is some distinction, without a difference, probably he will tell me what it is.
Is this Budget credible for today? Is it the Budget we want? Thinking back, one knows that the 1931 crisis was different, but it had one common feature. During the crisis of two weekends ago, which blew all around the corridors of the House and almost provoked a punch-up in the Chamber, people were talking—one has friends on both sides—about the possibility of 4 million unemployed, which would have been 1931 all over again. It is worth remembering, because the wrong figures are so often quoted against us, that the maximum of nearly 3 million unemployed—I think the total was 2,950,000—was reached 15 months after the Labour Government went out, when the National Government were in office, who said that they would keep on gold but in fact came off.
Therefore, this is the test and this is the fright which I had that night. No one who has had any extended period of unemployment, with all that this has meant—this applies to my colleagues as well—ever gets that out of his system. I could never consider percentage changes up or down in unemployment, since it brings back memories of what we used to call the "massacre", when the foreman would say, "What is your name?"—"Pannell".—"You are out of a job, Pannell," with a great deal of satisfaction. So I am not unaffected. To every unemployed man, it is the greatest crisis in the world; we should not be glib about these matters.
There is no public gratitude except for favours to come. Social services do not notch up votes. Nor does overseas aid; nor do some of these great matters of public and libertarian importance to which I would subscribe and for which I have done my stint in the past. I consider the matter from the point of view of this question: is the Budget credible in that context and, in the situation as we find it today, is it the right prescription? Broadly speaking, I believe that it is.
I come to what will probably be the most abrasive question on this side of the House; the incomes policy. Naturally, I would very much have preferred the T.U.C. to have brought in a voluntary incomes policy. However, it did not. Indeed, it was largely by the vote of my trade union, which switched from last year to this year, that one million votes were thrown the other way and it was decided not to have a voluntary incomes policy.

Mr. Orme: I know that my right hon. Friend likes to get the facts right. He would not wish to mislead the House and I am sure that he will agree that the T.U.C. approved the policy by a small majority.

Mr. Pannell: My hon. Friend should never anticipate what I was not going to say and I assure him that I intended to put the matter in its right context. I appreciate that the policy was passed by a small majority, but the majority was so miserable as to give it no authority at all. However, if the one million votes had been turned the other way, a massive majority that might have made sense


would have resulted. Consequently, nobody can blame me about this. Last year they were in favour of an incomes policy, but my Executive Council—I divulge no secrets in saying this—by three to two, decided to swing one million votes the other way. It do not know if anyone would call that a qualitative decision.
However, that is not my subject for discussion today. That is the industrial side of the movement and I respect it. I am referring to the political consequences. I have never believed that one could ask the trade union movement to come forward with an incomes policy. In effect, to do so would be turning a weapon against its own fundamental buttresses. As Sam Gompers said, trade unions are there to get more. As George Bernard Shaw said, they are an establishment within the capitalist society to get the greatest possible share of the cake. It is not the job of the trade unions to say how the general disposal should take place over the whole economy. Trade unions are a pressure group. I subscribe to that and I have represented them. I also know the lines of demarcation.
I postulate that if an incomes policy is necessary in the national interest—to over-ride all pressure groups and everything else to ensure that the lower wage earners, the unskilled and people who are not so powerful are not squeezed out into the damp and cold—then it is the function of Government to introduce such a policy and not the function of trade unions. I made this clear in a speech at the very beginning of this legislation, and that is where I stand today. I should add that it is not for those who would have supported the trade union movement in its view on the incomes policy to grumble at me now if they have not given the Government the weapon which would have enabled them to use the resources of the trade union movement. It was not the Government who defeated the policy at Croydon.
Can we say, as we look at the various parts of the Budget, that it is really so tough? No one who has had the experience of my younger years would consider the society in which we are now living a tough one. After all, what are we asking the people of Britain to do? If one considers any indices of the drink bill, the smoking bill—I am not castigating anybody but merely putting the matter in

perspective—and everything else, and if one then considers the primary needs of clothing, food, and shelter, of which there is little that one can do without, is it really being suggested that we are asking too much of the people?
Whatever hon. Gentlemen opposite may say or deny, many people claim—and many of them are on the benches opposite—that at any time within the last 10 years devaluation should have occurred and that we are largely reaping the harvest of past failure. In 1964 the right hon. Member for Barnet (Mr. Maudling) would probably have preferred—I put it no higher than that—a March election because he thought that things had gone too far. However, the Conservatives had their leadership troubles and, as a politician, I would not deny the facts of life, and nor would he. They had to play on borrowed time for long enough, and it nearly came off. They failed by only four votes in that General Election. I suggest that the Prime Minister just before then had not done so badly for them. However, it did not come off and we inherited the position with a majority of four.
I was a Minister of Cabinet rank at that time. Devaluation could have occurred then, but anyone with political nous will know that, in that context after 13 years of Conservative rule, it was just not on. I can say these things and know that they are being understood, since I am speaking among politicians—it would have been an almost impossible decision to have taken, in spite of the £800 million that was outstanding.
This Government went wrong because they believed that, somehow, they could ride the storm and sort things out. There have, therefore, been two views on both sides of the House about this. For the Government, trouble started immediately the November business began and directly we gave those massive increases in the social services. That is a fact and I was there at the time. That is when the first rush on the £ started. At stake then was not only the value of the £ but the question of whether the British people would be allowed to have a Government of their own choice.
There was at that time a great democratic principle at stake. I am referring to the time just before the run on the £ to the time when we were seeking to


implement the elementary social advantages that we had promised to the British people. [Hon. Members: "We still are."] I am speaking of the things that we have done up to date. The trouble started then, but I agree that there may be more to come. My hon. Friends should not struggle after differences when there is so much agreement.
The questions which the British people will ask and which are always reflected in by-elections and so on—since we have done enough in the social services to merit votes of confidence—are, "Are the Government paying their way? Are they responding to the normal moral principles by which people run their own establishments? Are they in command of the economy?" Those are the questions which the people of West Leeds and other sturdy places will ask. People do not like to see Governments who are not in command. That is the way people respond at by-elections. Perhaps they will respond in the wrong way for me, in which case they will not respond any differently until they become convinced that we are in command.
My right hon. Friend the Chancellor first came to the House soon after the war and was one of the younger hon. Members. He is the second generation of a notable family which has given service to the House. I have never believed in Opposition that my right hon. Friend's gifts were gifts for the market place. Hon. Members will know what I mean by that. Not for him were cheap indulgences in rhetoric for its own end. Most of the comments he has made in writing have stood the test of time. The cheers which greeted him at the end of his Budget speech were not only cheers for a skilful performance—which within the limit and ambit of the resources of his manoeuvrability he arranged so well and to that end it was a skilful Budget—but, in my view, were cheers for a belief in his personal integrity and a demonstration of our belief in that integrity. He struggled with the problem and expressed it and the results in a way which impressed the House. In the days to come, when all the cheers have died down and after the limelight has moved, we hope that he will have the dedication, integrity and sheer guts to see it through.

6.30 p.m.

Mr. Edward du Cann: The right hon. Member for Leeds, West (Mr. C. Pannell), who has spoken with his usual sincerity, and I, if he will allow me to claim such a distinction, are old friends and old sparring partners. However, in 12 years in the House of Commons this is the first opportunity I have had to follow him immediately in a debate.
The right hon. Gentleman will permit me, I hope, to say at once how much I agreed with him on some at any rate of the points that he has made. I agreed with him when he said that the necessity was to talk about today. As I understood his attitude, it was not altogether that he agreed with Henry Ford, who said in a celebrated law suit in Chicago in 1921 that all history was bunk, but rather that he agreed with the very much wiser predecessor of Henry Ford's who said that histories make men wise. It was the right hon. Gentleman's object in speaking to illustrate what has happened in the past and the lessons that we must learn and apply to today.
I agreed with the right hon. Gentleman also when he said that it is the object of the House of Commons in general and every constituent Member of it to improve the living standards of the British people. How true that is! May none of us ever forget that that is our duty. I agreed with the right hon. Gentleman, thirdly, when he said that the criterion by which we must judge this Budget is the extent to which it is relevant to the problems of today, and it is to that that I wish to address myself shortly and in somewhat less partisan fashion than is ordinarily, I believe, the fashion in the House at the present time and has been during the course of this debate.
I would say to the Chancellor that there was one matter in his speech that very much surprised me. He repeatedly referred to this Budget as "my Budget". There were no fewer than a dozen such references during his speech. So far as the excellence of the language was concerned, the pleasantness of the construction or the well-argued decisions—those things may have been the Chancellor's, but the strategy was not, and, indeed, it could not be. As my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) pointed out, the Chancellor was


not even following in his Budget speech his own past advice. The fact is, for better or worse, that like it or not—I dislike it intensely—the United Kingdom at this time is not its own master. It is, indeed, in pawn to other countries and to international agencies.
One of the remarkable facts is that we in the House of Common do not even know the extent to which our country is in pawn. We do not know the full extent of our indebtedness, either actual or contingent. It is possible that our known debts are of the order of 3·3 billion dollars, our undisclosed debts may be a further 2 billion dollars, making a total of 5·3 billion dollars, against which we have reserves of 2·8 billion dollars. One can argue, therefore, that perhaps the debt is a minimum of 2·5 billion dollars, or maybe it is 3 billion or maybe 3½ billion dollars. Who knows? Nobody knows except the Chancellor, the Chief Secretary maybe, the Prime Minister and the Economic Secretary. But none of us knows. We simply do not know what trouble this country is in. Even those reserves of which I have spoken, at 2·8 billion dollars, to a degree are mortgaged.

Mr. C. Pannell: The right hon. Gentleman has posed a question. Can he put his hand on his heart and say that when he was Economic Secretary to the Treasury he could have given the appropriate figure at the time?

Mr. du Cann: I think I most certainly could. But I am concerned to argue this point. So serious is this position that we are not now ready to disclose exactly what our liabilities are. I was going to make the point that I hope that the Chancellor of the Exchequer will, from a position of strength as early as possible, disclose the facts to this House and to the world. That would be a sign of confidence and probably the best thing he could do to give the British people and the world exchanges a tonic.
It was the Chief Secretary today who said that the position in which we find ourselves is intolerable. I agree with that. To the extent that the Chancellor's aim is to change that situation finally, and to the extent that he seeks, as he says, to ensure that the nation succeeds after devaluation, his objectives certainly are the objectives of us all. But I quarrel with my right hon. Friend the Member for

Stafford and Stone (Mr. Hugh Fraser), who was arguing for devaluation earlier. I am one who believes that devaluation was totally unnecessary, and I do not believe that anyone in his right mind can argue for a deliberate lowering of the living standards of the British people through it or, indeed, in any other way.
Some would argue that the Chancellor dallied much too long after he assumed his office in introducing the measures that he has now presented. Some would argue that it may be that because he dallied for some period he finds himself now having substantially to increase the dose. I will not argue these points through but merely say that there will not, I believe, be many more, if any, chances open to us in future. We either make a success of this devaluation or we face a future for our people, bearing in mind the point made by the right hon. Member for Leeds, West, which would be serious in the extreme.
As the right hon. Member for Battersea, South (Mr. Jay) said earlier in the debate, devaluation by itself is not enough, and the net effect—that is to say, the advantage to the United Kingdom exporter—of devaluation is, in fact, small. It will not last. Indeed, the Budget itself ensures in direct and indirect ways that that will be so.
I say nothing of the increase in the cost of living, or, indeed, of what one might describe as the very unsure wages policy with which we are now faced. My right hon. and learned Friend the Member for Wirral and the right hon. Member for Leeds, West both made the point that it is essential for the Government to take a view on the subject of wages, and I believe that this is correct. I find a compulsory wages policy entirely unacceptable. Similarly, I find a free-for-all, as some would advocate, with the unspoken discipline or large unemployment behind it equally unacceptable.
But I am constrained to suggest to the Chancellor that perhaps one of the difficulties in implementing such a policy at the present time derives from the fact that to the majority of the people in this country incomes policy automatically means incomes restraint and nothing else. Surely one of the troubles in succeeding years since the time when this phrase was introduced, as my right hon. and learned Friend the Member for Wirral


said, is that we have looked upon an incomes and wages policy in entirely a negative fashion. Why cannot we put the matter for a change in more positive form? Why cannot we say, as I believe may possibly be the Chancellor's policy, "the sky is the limit for wages and incomes provided that people actually earn them", rather than saying, in effect, "Find out what little Johnny is doing, and if it is more than 3½ per cent. he is certain to be wrong."?
In detail on the Budget, there are matters, of course, for congratulation and approval—the economic forecast, now to be printed; the realism in regard to export prospects; the move over to indirect taxation; and, indeed, the realistic attitude towards investment, the seed corn of the future. But probably the Chancellor has had enough of euphoria.
If there are good things in the Statement there are also sillinesses. One is the right hon. Gentleman's decision to impose on inefficient and efficient companies alike the same policy on dividends, quite irrespective of the real capital involved. I thought that, when the Chief Secretary was speaking today, he had no appreciation of the difference between real capital employed in a business and anything else.
The second silliness is in retrospection. The third, but by no means least, is the Chancellor's whole attitude to savings and incentives. Why is it that, if a man works hard all his life, takes risks, perhaps deprives himself and his family of immediate rewards, and brings benefits to the community, he is regarded almost as being in the category of a social leper? It seems that the heroes of our present system are those winning dividends on the football pools or on the style of Premium Bond or on the new style of lottery—that is, unless the Prime Minister has the courage of his convictions and votes against it.
Why do so many of us take the view—and, indeed, many nod sagely at such suggestions in this House—that there is something immoral about the possession of a small amount of wealth?
Who is the Budget going to hit? It will hit the skilled artisan, just the sort of man who is beginning to put his savings to productive use, beginning to buy his own house and the rest. Of course it will hit people be-

low that line as well, but surely the Chancellor should be using the instrument of taxation as a method of social policy, to encourage a greater number of people to stand on their own feet, year by year, and to say to the State in effect, "I will solve my own problems rather than expect you to solve them for me and pay the bill thereby. However, as has been suggested, some of these are detailed matters which we shall be discussing in Committee.
The Chief Secretary said that the Bill will be published in two weeks' time. I beg him to expedite its publication. There is much to be thought about in relation to the Bill, as he knows.
I want now to pass to two interrelated matters.
It would be undeniable, I think, that right hon. and hon. Members on both sides had gold very much in mind when the Chancellor rose to speak. As the right hon. Gentleman the Member for Leeds, West said, on that traumatic night, when first we heard that the banks were to be closed the following day—news unbelievably given to the newspapers before this House—a chill ran right through this Chamber.
The gold price was fixed in the depression in a time of falling or at any rate steady prices. Since then the world has enjoyed great prosperity. But today the situation has completely changed. There is substantial inflation in many countries, not least here, where the value of the £ sterling has fallen by no less than one-third over the last 10 years. One can attack the United States for the crisis which came before us—for being, if one likes, insufficiently worldly wise. There are various aspects of American policy about which we hear so much in Grosvenor Square and other places, but sometimes we should congratulate the United States on bearing the whole defence of the free world alone. [HON. MEMBERS: "Oh."] Hon. Members can be rude about the United States if they wish, but what is the dollar?
The dollar is a charge upon the resources of the most inventive, the most productive, the most dynamic and richest economy the world has seen. The United States could virtually cure its balance of payments difficulties, at any rate in trade, by a snap of the fingers. But those who castigate her for the position she finds herself in should recall, or


at any rate reflect, that perils also could follow on that. For instance, if there were to be deflation the perils to world trade are obvious. If there were to be growing protectionism, again the perils for us and other nations would be very dreadful. We should think a little carefully before we so readily attack the United States for her balance of payments deficit at present.
As many know, I am an ardent Francophile but I have no time whatever for the prejudices and the selfishness which the French have shown in relation to world economic affairs in recent years. I have publicly described their behaviour as verging on the criminal. But people can attack the United States and they can attack France; it is our job to look particularly at the United Kingdom.
The rush for gold derived from one thing only—distrust of currencies—or paper money and sterling. The Chancellor pretended at one time that this was almost wholly a dollar crisis but it is primarily a sterling crisis. That is clear. Sterling is in the front line. The persistent deficits we have had over a number of years have, on the one hand, provided the world with additional resources but, on the other hand, have acquired a magnitude and continuity which has made people extremely reluctant to hold sterling now as a reserve currency.
Just before the banks were closed on that Friday, there was a prodigious run on sterling. If that were not so, why did we acquire an extra standby credit of about 4 billion dollars? Why has distrust of currencies and sterling in particular come about? For one very good reason, and one reason only—the profligacy of governments and of our Government in particular.
We heard from the Chief Secretary a purported defence of Government expenditure in general. I thought that he did his undoubted intellectual gifts a disservice by putting up such a trumpery show. The facts are clear. In 1957, public expenditure was approximately 41½ per cent. of the gross domestic product. By 1966, it had risen to over 47½ per cent., and this at a time when the gross domestic product in general had been climbing at a fair rate. The Chief Secretary had the extraordinary affrontery, as I would almost call it, to say to practical business people in this House

that one could not run a business by imposing strict budgets on the departments within it. I never heard such nonsense. We cannot go on running a Government in the way we are running this one, with almost no control over expenditure.
In 1965, the gross domestic product rose by some 3·1 per cent. but the money supply—we heard nothing about this from the right hon. Gentleman—went up by 6·4 per cent. In 1966, the gross domestic product went up by 1·7 per cent. but the money supply went up by 6·2 per cent. In 1967, the gross domestic product went up by a pitiful 1·6 per cent., while money supply was no less than 8 per cent up. I will not weary the House with a statement of my personal support for the principles of the Welfare State or for necessary Government expenditure, but I should point out that, last year, just as we did this year, we sat down here and listened to the then Chancellor making another very good speech. We also had before us a financial statement—rather less clear than the present one (on which I congratulate the Chancellor)—and we took in seriously the figures which the Home Secretary told us about. Both in the increases which we experienced subsequently and in the discussions—and there have been no less than four or five this year, often led by the Prime Minister—about cuts, we were looking at a set of figures which were wholly unrealistic. We were presiding at a farce. This sort of situation simply cannot continue.
If it is the Chancellor's view that expenditure in the public sector must, broadly speaking, henceforward be restricted to a level which is covered by taxation and private saving, that is fine. I take it that he is dissatisfied also with that part of the notorious Letter of Intent to the I.M.F. which stated:
…the growth of money supply will be less in 1968 than the present estimate for 1967, both absolutely and as a proportion of G.N.P.…
In so far as my suggestions are accurate, I give him credit, but right hon. Gentlemen may feel as I do that it is grossly unsatisfactory, to say the least, that we have so little information about Government expenditure as it increases and even less control of Government expenditure, in both general and particular.
There are historic parallels for this situation. We do well to heed them and


to take action with those precedents in mind. I hope that the right hon. Member for Leeds, West will not think me wrong for referring to them for just a moment, but surely there must be, almost as a matter of immediate urgency, a fixed limit to Government short-term borrowings, and the House should set that limit. If there is an outstanding subject for reform of our procedures, it is that the House should have more control of expenditure.
I said that I would make two points and I now move to the second. It was most notable in the Chancellor's television speech that he said that we must keep sense in the world monetary system. I agree with the right hon. Member for Llanelly (Mr. James Griffiths), who made a moving speech, and I should very much have liked to have heard in the Budget speech a wider definition of what I would call our country's world economic strategy. The lack of this puts hon. Members on both sides of the House in some difficulty in endeavouring to appreciate precisely what the Government's policies are.
If I were asked to put forward an economic strategy I should mention these things: first, that we should secure by all the means open to us, international negotiation and the like, an increasing volume of world trade; secondly, again by the same methods, ensure the removal of all the removable barriers to world trade; thirdly, and by no means least, that we should, again in the same way, provide an adequate world payments system. It has been said several times during the debate that the whole purpose of the world payments system is to ensure prosperity. Of course that is true, but there is something else, which has been very much lacking in the last five years or even longer, and that is to provide stability.
As we all know, the Chancellor is going to Washington and then on to Stockholm. My right hon. Friend the Member for Stafford and Stone said we should not build up the S.D.R.s too much. I wish to heaven that the Budget had not been built up as it unnecessarily was by the Government, but perhaps that is another story. I agree that there is a danger in building up a situation that one invariably gets a feeling of let down. On the other hand, I agree that it is equally important

that progress of some sort should be made and should be seen to be made. It is clear to everybody that the two-tier system cannot work for very long. I shall not seek to argue this afternoon whether gold should be demonetised or its price increased, although I am inclined to the view that the price should be increased. What I say is that there are too many uncertainties about the situation—the attitude of South Africa, for example. What matters more than anything else is that this problem should be settled and settled at the earliest possible moment.
There are other matters which have not been mentioned except in passing. In their way they are equally if not more important. If you look at the horizon of the next few years, Mr. Speaker, there is a wave out there which at the moment is small but which in a year or two will rise to tidal wave heights. I refer to the continually growing disparity between the living standards in the developed and in the underdeveloped countries. One of the tragedies of the U.N.C.T.A.D. conference in Delhi is that it looks as thought it is succeeding in widening the gap between various nations. Nothing could be more tragic. It is another subject which urgently requires the attention of the developed countries and, in spite of what is said in the forecasts. I do not believe that the prospects for world trade are good. There are certain frightening elements in the picture, as I have already illustrated.
These things—and I have mentioned only a few which I believe to be of the greatest importance—lead me to agree with General de Gaulle when he points out that Bretton Woods was 24 years ago and that it is now time to prepare an agenda with a view to providing new stability in the situation to last as well as the original Bretton Woods agreement has lasted.
I am asking for two main things. understanding and control of Government expenditure day by day and generally. Secondly, the British Government should take the lead in endeavouring to settle some of these international questions. This Budget, like the Washington bankers' discussions, has only bought time. How much? I suspect that it is not much. The Chancellor referred to two years' hard slog, words repeated by the right hon. Member for Llanelly.
I believe that we have only a few months in which to deal with these problems. With each crisis which we experience in the United Kingdom the problems and the risks and the difficulties of successful extrication multiply. The loans get larger and there is a heavier burden of repayment. It was Aristotle who said that a whole is that which has a beginning. a middle and an end. I congratulate the Chancellor on the beginning, as the House would wish, regretting, however, the situation in which it finds itself. I believe that we shall be better for knowing about the middle and the end, for it is not only his personal reputation, about which so much much has been written and spoken, which is at stake. It is the prosperity and living standards of our people, and nothing but the best will do for them.

7.20 p.m.

Mr. Stanley Orme: I am sure that the right hon. Member for Taunton (Mr. du Cann) would not expect me to follow him in his long dissertation. I want to return to the arguments that have been raised about the strategy of the Budget, and whether it will play a part in solving the economic problems lacing us. While I have no criticism of the increases that have been made in taxation on luxury goods, and the imposition of the gambling and the wealth taxes, I feel nevertheless that the Chancellor, moving as it were away from direct taxation as opposed to indirect taxation, is wrong. The extension of direct taxation, used in a progressive manner, as it can be, would ensure that there was a fair distribution of the burdens to be carried.
The Chancellor is taking £600 million in purchasing power out of the economy, and there are increased prices still arising from devaluation while others will follow from increases in the duty on petrol and in S.E.T. These will fall not only on the lower-paid worker, but on the skilled worker in the £20 to £30 bracket. In addition, there are the prescription charges, increases in the cost of gas, electricity, school milk, National Insurance stamps, postal charges—most of them Government expenditure, or Government decisions through nationalised boards which, by the summer, will be working themselves out into the cost of living. These are the charges that will create the

difference between what the Government want wages to rise by and the amount by which prices will rise.
I want to deal briefly with the question of the abolition of the three waiting days. I cannot see the purpose of this at all. There was a great fight to bring this about. If the Chancellor thinks that he will stop the worker from going on to the full fortnight, thereby claiming the whole of say, his sickness benefit, I would suggest that he abolish the three waiting days the other way, in essence pay for five days, and see what effect that has in saving particular benefits. We have not yet had a satisfactory explanation of this decision.
The Government are now to extend the statutory incomes policy on a much broader scale. In line with this, they intend to bring in legislation dealing with prices, dividends and rents. In our mixed economy it is impossible to control prices or dividends. Dividends may be restrained for a short period, but, as we know from the Cripps period, they can be held back and paid later. Rents will be based on phasing out, but the increase will have to be made, whether within eight months, 18 months or two years. One can never regain an increase in income once it has been lost.

Mr. John Page: Is the hon. Member aware that wages underpaid for 12 months can be retrospectively held by the employer and paid to the employee at the end of the period? That was specifically stated by the Secretary of State for Economic Affairs on Thursday.

Mr. Orme: I thank the hon. Member for reminding me of that. I presume that he will recommend this to the employers. Wage increases do not grow on trees. This is far from true, even in a period of full employment and expansion. For the first time in our history, within a period of growth, the Government are actually stipulating that there shall be a reduction in real incomes. I believe that this is unacceptable. My right hon. Friend the Member for Leeds, West (Mr. C. Pannell) talked about the 'thirties, and the spending power existing today. I hope that we have advanced from the 'thirties and that the increased wealth that technology and scientific progress brings will bring about a higher


standard of living. If not what is it all about?
To say that one can reduce wages is absolutely unrealistic. What do the Government mean by 3½ per cent.? Does that mean that every worker will get that increase automatically? Of course not. He will start off from the nil norm after prices have risen, and then he will have to negotiate his wage increase. During this period the maximum that he will be allowed will be 3½ per cent. Who are these people who will be held back by this legislation? If we are talking of trade unionists, there are nine million or 10 million of them, there are 26 million insured people, and there are many self-employed people. We have heard about some of them today, the barristers and many other categories.
We know that people within many types of employment are able to negotiate increases which will not, in any circumstances, be reported to the Prices and Incomes Board. Despite what some of my hon. Friends say, I believe that, as happened under the freeze and then during the period of severe restraint, the gap between the lowest-paid worker and the medium and higher-paid worker will be widened and not decreased. It is supposed to be the aim of a prices and incomes policy to prevent this.
Who are the workers who will be so easily controllable under this system? Directly or indirectly they will be Government employees, whether railway workers, teachers, nurses or many of the transport workers. These are the easily definable groups. Then there are the groups within say, the engineering industry. There are many sections of industry upon which we will depend for the export explosion which we are so anxious to bring about. This policy will lead to a contradiction. It will hinder, not help, development.
We have been told about wage drift. I put a Question to my right hon. Friend the Secretary of State for Economic Affairs, asking him what he meant by plant bargaining. Has this to be reported to Aubrey Jones? If every case had to be reported to him, he would not be able to get them into all the offices in Victoria Street, let alone the building that he now occupies. It is impossible. Take Ford's, which are on a fixed hourly rate, nego-

tiating on a factory basis. Would their claim have to be submitted? Would a claim from B.L.M.H., which operates on a different principle, need to be submitted? Where is the criterion?
I do not believe that we shall be able to bring about acceptance that this system is fair and equitable and will work, because it will not work. This is the crux of the problem. The Government make this the central theme of their economic policy instead of going for expansion and growth and higher wages and low unit costs. The United Nations Economic Survey of Europe states:
The United Kingdom has next to the lowest increase in average remuneration and yet the highest increase in labour costs per unit of output because it also has the lowest growth in output per head…
But there are many other instances which one could quote from this publication which show that on fixed capital and output the United Kingdom in 1964 was the lowest of Western European nations and was near the bottom on prices and incomes. If emphasis is placed on easily definable groups of workers, which is completely unacceptable to trade unionists, it will cause friction.
Much reference has been made to the T.U.C. Economic Review and the decision at Croydon. I want to make a defence of collective bargaining. Too much has been said against it. It is said that it is imperfect and has many weaknesses and faults. But so has our society. No better system has come forward. It may be said that it is odd that as a Socialist I should advocate planning but not planning of incomes. There is no planning in prices, rents and dividends in the rigid sense that we find in incomes.
The T.U.C. published a comprehensive, basic, economic document detailing many facts which would be good for growth in the economy. It particularly advocated a 6 per cent. growth and many of the things which many of my hon. Friends have been advocating for months. The Government say that they cannot accept this growth rate or any of the other things, but that the T.U.C. must accept without equivocation the section on incomes. This is not good enough, and the T.U.C. will not accept it. The Government pick out from this economic review what they want and reject everything else. I believe that the 6 per cent.


growth referred to in the T.U.C. statement is attainable. If it creates the excessive demand about which we have heard so much, there are ways of dealing with it other than those which the Government propose.
I wish to deal briefly with the Conservative case. We should examine it, and not just to make political capital out of it. It should be examined fully by trade unionists. The Conservatives oppose legislation on wages. But what do they say should be done instead? The Leader of the Opposition, on Budget Day, said:
Above all, the Government have the responsibility to ensure that the vast public sector which is now under their control does not grant wages which are more than productivity Will justify."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 308.]
On the following day, the right hon. Member for Enfield, West (Mr. Iain Macleod), quoting what he had said on a previous occasion—and perhaps I might dare quote it again—said that the Government
are the biggest employers of all, and a stand by them in the nationalised industries against increases unmatched by productivity and against increases which the country cannot afford would do more good than any amount of exhortation '."—[OFFICIAL REPORT, 20th March, 1968; Vol. 761, c. 440.]
In other words, "Let us have another Selwyn Lloyd." The Prices and Incomes Board's report on the nurses is coming up this week. Remember what happened when Selwyn Lloyd introduced—

Mr. Speaker: Order. I allowed the first reference. I cannot allow the second one.

Mr. Orme: I am sorry, Mr. Speaker. I withdraw the reference. I meant it in inverted commas.
That policy was introduced in 1961 in an endeavour to force a freeze on a section of the community and to allow the rest to go free. The Government are doing it in a more sophisticated manner, but it does not make it any better. It did not work under a Conservative Chancellor of the Exchequer. He was forced to abandon it under pressure.
The Conservatives have mentioned seven points in their case, including legislation against trade unions. As David Wood said, quite rightly, in The Times this morning, the Opposition are badly

divided on incomes policy. They are not committed to growth and higher wages. They are misleading the country. I should like trade unionists to note very carefully what they are saying and what their policy is. It is not a policy which trade unionists should support.
We shall not achieve growth and get resources moved into exports and encourage people to create wealth for this country and give of their best by lowering their standard of living. If it is right for the Chancellor of the Exchequer to say, "I have not increased direct taxation because I have taken incentives from the higher incomes groups", I ask him about incentives for workers who produce the wealth, who will be restricted by this policy.
I should like to see a basic minimum wage introduced. I should like to see flowing from this a new strategy and approach by the Government. Wages legislation will not work. It will create dissension within the Labour movement, particularly between the trade unions and the Labour Party. It will save perhaps 1 per cent. or 1½ per cent. in holding back wages. This policy will not create the economic climate which is essential if the Government are to get out of the present economic difficulties.
The opposition outside to wages legislation will grow. Many of us cannot support wages legislation. We feel that it would be wrong for us to support punitive legislation against trade unions. We say to the Government, "Withdraw this disastrous policy before it is too late. Withdraw the White Paper. Go for growth, go for expansion and go for co-operation with the trade union movement and the working people who in the final analysis are the only people who can get this country out of its present mess".

7.39 p.m.

Sir Ronald Russell: In The Times today, Mr. Humphry Berkeley complains that most speakers in the House do not take up what is said by the Member speaking before them. So far today that complaint has been completely unjustified, but I hope that the hon. Member for Salford, West (Mr. Orme) will forgive me if I justify it, because I wish to be as quick as I can in making the speech which I


planned to make, knowing that there are hon. Members on both sides of the House who have been sitting here most of the day and all of Thursday, trying to catch your eye, Mr. Speaker.
This is the most savage peacetime Budget I can remember, and my political memory goes back at least to the first post-World War One Budget of 1919. It is all stick and no carrot. There is not a glimmer of hope in it for anyone. If the Chancellor had deliberately set out to find a way of spreading gloom and despondency throughout the nation, he could hardly have done better. The only relief seems to come from the characteristic charm and clarity, which has been referred to often before, of the Chancellor's presentation and delivery.
Moreover, as my right hon. Friend the Leader of the Opposition was quick to point out in his speech on Tuesday, the Budget makes a complete mockery of the Prime Minister's famous statement that over the lifetime of this Parliament there need be no general increase in taxation. This Parliament is not quite two years old, but this is its third Budget. Even if this Parliament should run its full term—and I should be very surprised if it did—there could hardly be more than another two Budgets. What hope is there of completely reversing the trend of the last three Budgets, making slashing cuts in taxation and reducing the crushing total which is being taken from the people to below the 1966 level?
This is an anti-road user Budget with a vengeance, as my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) this afternoon suggested. It seems to be clearly the result of close co-operation between the Chancellor and the Minister of Transport. The right hon. Lady seems to have agreed to scrap 27 Clauses of her cumbersome and costly Transport Bill and in return the Chancellor has given her even more onerous licence duties on both commercial transport and the private motorist.
Pages 11 to 16 of the Financial Statement make very gloomy reading. They represent increases in duty of from one-half to one-third on various vehicles, from private cars to heavy goods vehicles. It is well known that the Minister of Transport is longing to force passenger and goods traffic off the roads, some of

which are admittedly congested, on to our overburdened, unreliable public transport system. Pricing it off the road, however, is not the way to do it. That can lead only to higher costs, especially on top of 4d. on petrol and higher Purchase Tax on new cars, vans and lorries.
Incidentally, although there is no farm in my constituency, the increased charges for farmers' goods vehicles seem particularly harsh. How can they possibly use public transport? How many farms have railway stations at the bottom of their farmyard with an efficient goods service to the nearest market?
The Government's policy is bound to make exports dearer and the Chancellor is undoing with one hand what he is vainly trying to do with the other hand. I thought that the late Lord Dalton and Sir Stafford Cripps proved 20 years ago that the way to help exports was not by contracting the home market, but by expanding it and broadening the home base of industry, thus lowering costs. Apparently, however, the fallacy of cutting down home sales and trying to force goods into the export trade has got to be learned all over again.
Peter Deeley, motoring correspondent of the Observer, in an article yesterday forecast increased unit costs due to a drop in home demand for motor vehicles. He quoted Lord Rootes and Sir William Lyons as saying that it will become uneconomic to continue at current overseas price levels. What a pity the Treasury will not take note of the experience and advice of industry in these matters.
I certainly cannot remember a peacetime Budget in which petrol duty, licence duty and Purchase Tax on new vehicles have all been raised at the same time. The petrol duty is now 3s. 11d., or two-thirds of the cost of, say, a second-rate petrol at 5s. 11d. It must be the highest-priced petrol in the free world except for France and Italy. But we should compare it not so much with those two countries as with Commonwealth countries and our E.F.T.A. partners and the United States to make a true comparison. In that case, one finds that our rate of petrol duty is much higher.
This threefold impost on road users is a grim monument to three and a half years of Socialism. Moreover, it is a blow to many factory workers as well as


office workers. When visiting any factory in my constituency of Wembley, South—or any other constituency—one sees the number of cars, motor cycles and mopeds in car parks or on the roads outside where there are no car parks. That is a measure of the great increase in the standard of living during 13 years of Conservative rule from 1951 to 1964. Now, all those people are to be still worse off.
Nor is it a matter of trying to drive them back on to public transport. I cannot speak for other cities than London, but surely London Transport buses are too unreliable, mainy owing to staff shortages. 'They cannot possibly carry any more in peak hours. The underground is more reliable, but it is grossly overcrowded in the inner areas in peak hours and passengers, so my daughter tells me, are packed tighter than the proverbial sardines. I am told, for example, that if a passenger gets in at St. John's Wood, on the Bakerloo Line, at the height of the peak hour, it is so crowded and passengers are so crushed that if he starts with his arms down at his side, he cannot possibly blow his nose until he gets to Oxford Circus. There is not room to move a muscle.
British Railways are not always reliable and, although I have no direct concern with it, the Southern Region is still almost a joke in its timekeeping. Small wonder is it that there has been a steady increase in commuting by car, or partly by car and partly by public transport thanks to the provision of car parks at underground stations begun by Lord Watkinson when he was Minister of Transport about 10 years ago.
Despite congestion, travel by car is normally quicker door-to-door and far more comfortable and reliable than public transport. If it were not, there would not be so many of Her Majesty's Ministers commuting by official or private car every day. In saying that, I attach no blame to them—they are quite right to do so—but there are others who want to do the same.
I had some correspondence about this with the Prime Minister a year ago. It is utterly wrong for anybody who believes in democracy to try to reverse that trend by unfair and penal taxation on road users. If the Government want to reverse it, they must attract people back to public

transport by making it more comfortable and more reliable.
Since the Government came to power, there have been 10 separate increases in taxation of car owners in petrol duty, licence duty and Purchase Tax. In the same period there have been three cuts in expenditure on the roads—or, perhaps I should say, cuts on increases previously announced. Road user taxation has now reached an all-time high record of £1,561 million a year, which is £526 million more than if the increases since 1964 had not been imposed, yet the annual expenditure or roads is less than one-fifth of that amount. If the amount to be spent under the Transport Bill alone could be added to the expenditure on the roads, it would make a sizeable improvement in our roads programme.
As for the Selective Employment Tax, I was amazed when I heard the Chancellor propose an increase of 50 per cent. That also can lead only to higher prices all round. It is the most absurd tax ever invented, as my right hon. Friend the Member for Barnet (Mr. Maudling) said last year. Taking £1,100 million from services and certain industries and paying back £900 million, as was done last year, is absurd. Now, less is to be paid back but more is to be taken out. Nothing has annoyed industry more than the S.E.T. It should be swept away and replaced by some kind of added-value tax.
The Secretary of State for Economic Affairs has described the compulsory wage freeze as an extension of incomes policy enforced by law, and this has been touched on at length by the hon. Member for Salford, West. Presumably that phrase was used in an attempt to make it sound harmless. Whatever it is called, I feel that such a policy of compulsion should have no place in a free society. Everyone who believes in Parliamentary Government should vote against it. Any of my hon. Friends who think it will curb the power of the unions have picked the wrong remedy, I believe. The right one is to establish a new code of industrial relations and bring up to date the framework in which it will operate, as my right hon. Friend the Member for Mitcham (Mr. R. Carr) indicated last Thursday.
Lastly, as Chairman of the Commonwealth Producers Organisation, I deplore


the fact that there are further increases in duty on wines and spirits, especially those of Commonwealth origin—though I know that under the G.A.T.T. it is impossible to increase duties on foreign products without doing the same with Commonwealth ones as well. As the increase does not affect the margin of preference but decreases the proportion of preference it thus must make it more difficult to sell Commonwealth wines and spirits over here than formerly. In the world of today everything possible should be done to stimulate more trade with the Commonwealth, and in this respect this Budget fails because it discourages investment with countries like Australia. After all, Canada, Australia, New Zealand and South Africa are our best friends in the world, and I would remind the House that although South Africa is now a foreign country it is still inside the Commonwealth Preference area. We should do everything in our power to align ourselves with the Commonwealth, and this Budget does not do that.
I am very glad that my right hon. Friends have decided to vote against the whole Budget in principle tonight, and to challenge its details in the Finance Bill which is yet to come.

7.51 p.m.

Dr. John Dunwoody: The House will forgive me if I do not follow the hon. Member for Wembley, South (Sir R. Russell) in all his detailed criticisms, especially of the Budget's implications for transport, though I must say in connection with what he said about petrol prices that I think that if he looks at other countries which are not petrol producers and averages the cost of petrol to the consumers he will find that even after the Budget our prices compare favourably with theirs.
I was rather interested, too, in his remarks about Her Majesty's Ministers and their cars. I thought he was going to criticise their use of cars, but he went on to say that it was quite right that they should use them. I would differ with him there. I think that if Her Majesty's Ministers had a self-denying ordinance and one day a week did not use cars but used the public transport some of the questions which the hon. Member raised about the Bakerloo Line, for instance, might be put right a little quicker than otherwise

I turn to the critical economic situation. I regret that in the parts of the debate I have heard and in the rest which I have read there has not been from the Opposition any alternative suggestion as to what we ought to be doing. We have heard a great deal of criticism of the measures adopted by the Government but very little in the way of alternative suggestions.
We in Britain are facing a critical economic situation due to a number of different factors, and I think that anyone who suggests that the economic crisis is simply due to one overwhelming factor is naive and is misleading people. One of the reasons for our critical situation is a succession of economic setbacks over a large number of years. Some of those setbacks have been due to policies pursued by successive Governments—one has to be honest about this—from both sides of the Chamber, and over a large number of years, or perhaps to not pursuing to a greater extent, as they should have been, what were correct policies.
In addition, there have been external factors such as those resulting from the Middle Eastern war, and we have had pressures resulting from the changing European economic situation and from events in America beyond our control. We have also had pressures resulting from what I regard as the exaggerated responses overseas to internal problems here in Britain. We can look back, for instance, to the dock strike, and the serious burden put on our economy in the international field, out of all proportion to the true economic cost to our country.
Now on top of all those other burdens we have this international crisis. We have the international pressures on the dollar which, I believe, to a considerable extent are the result of American policies, domestic and overseas, and the increased difficulties which the American Government face with their balance of payments deficit. Also, there is one factor which has been mentioned on one or two occasions in the debate but not perhaps as frequently as it should have been and that is the cost, not only in economic terms but in political terms as well, of American policies in Vietnam. This is not the occasion to go into this in great detail, but there can be little doubt that the economic cost and the political cost of American policies in Vietnam over the last two years have


played a part in producing the sort of crisis which the world today is facing.
All these things are inter-related, and to imagine that one could have as serious a situation as there is in Vietnam without affecting virtually every country in the world is exceedingly naive. One could pose the question of the extent to which developments in Vietnam in just the last few weeks—the Tet offensive, for instance—have played a part in our having to face the serious Budget which we are facing today.
Thus I think a new situation has arisen. This new situation has given rise to a financial and economic hysteria in various parts of the world, which is, perhaps, in many ways unprecedented. We have bankers flying all over the world and meetings almost weekend after weekend. I believe that because we are facing a new situation it may well be that we shall be prepared to consider, to a greater extent than in the past, new remedies.
I believe that this Budget makes a very real and significant contribution to developing what is greatly needed today, a degree of stability in our international financial system. It takes some steps at least towards the development of a sane and realistic system of international finance, although obviously there is still a long way for us to go. The Chancellor will be going to Stockholm later this week, and the meeting of the Group of Ten will be of great significance to all of us in this country. I hope that his efforts there will result at least in disposing of the suggestion which we hear, that there is to be a reduction in world trade.
I hope that my right hon. Friend will be able to take effective steps towards putting the £ in what I regard as its real position in the world. In financial terms, because of the position of the £ as a reserve currency and trading currency, we have been continuing to live in the sort of Victorian era which we have put behind us in the defence field and in the field of overseas expenditures. In the same way as we have put behind our imperialist past in the colonial sense and in the military sense, we also have to put it behind us in the financial field.
There is a tendency on the part of some people to dwell on the past. We have to face realities, the realities of the

late 1960s. Those realities will also have to be faced by the American Government, because the dollar is not so almighty in the modern world.
This Budget makes a contribution to the solution of the problems of the economic situation. It goes some way towards helping our trading position. It gives time, and will help to create conditions, in which we can work towards a balance of payments surplus. It would, however, be an illusion to imagine that the Budget alone, any more than devaluation alone, will enable us to achieve success. The Budget alone, or with devaluation, is not the answer. Even with the prices and incomes policy it is still not the answer.
I am not one of those who oppose the prices and incomes policy, though I have some criticism of the policy as it appears to be at the moment. I accept the need for a coherent and rational prices and incomes policy as part of the overall financial strategy. However, I am a little concerned with the way in which all workers are subjected to the same norm, irrespective of their rates of pay. I would like to see some of those whose earnings are well below the national average not restricted in the same way as those earning average incomes. Some of those who are less vocal in speaking up for themselves, such as agricultural workers, some of those working in the municipalities and those working in parts of the country where wages are lower than the national average, should go a little more than 3½ per cent. At the same time, I accept that some of those who on occasions are the most vocal opponents of the policy and who are earning well above the national average will have to accept less than 3½ per cent.
In any event, even with the Budget, with the prices and incomes policy and with devaluation, we are only buying time, and the time must be used. I regret that there has not been sufficient emphasis laid on this during the debate. The time has to be used in particular by British industry, which must abandon the slovenly lethargy which has been the hallmark of industry in this country for too many years. British industry has to modernise itself. It has to sell in the world's markets in a far more positive way than it has been prepared to do in past years. It has to make deliveries on


time and provide after-sales services which compare with those of our world competitors.
When one travels abroad one realises far too often that we do not stand comparison with our competitors. We have to see that we do not always take the soft options and go for the home market. We must see that, when a situation like devaluation occurs. we do not merely step up prices and increase our profits without necessarily taking a larger share of the international markets.
We want an industrial revolution. Industrial management must look further ahead than just next year's balance sheet. Managements must consider what is to happen in 10, 15 and 20 years' time, and they have to consider the social consequences of what they are doing. It is also time for a dramatic change on the shop floor amongst many trade unionists, who attitude towards modernisation and progress in industry has to change. We are no longer living in the 1930s, though far too many managements in British industry and, I fear, some trade unionists think that we are. There are trade unionists, shop stewards and managers who are conscious of the need to make progress and introduce changes at a more rapid rate to make ourselves competitive in the world. Far too often such people are in the minority.
There are hard, bitter and traumatic experiences ahead for British industry if we are to become competitive. In some cases we have to abandon attitudes of a lifetime. It is essential that a second industrial revolution takes place if we are to have economic success and progress and obtain our fair share of the world's markets. If we do not do it, we shall be faced with a succession of economic crises. Year in and year out, we shall face the serious situation which we have experienced far too often in the last 10 or 15 years. We shall find unemployment figures rising and our living standards falling.
I turn now to the Budget and to one or two of its provisions. As we have been told on a number of occasions, there is considerable emphasis in it on indirect as opposed to direct taxation. I welcome the selectivity in the emphasis on indirect taxation, although there are certain aspects of it about which I am

more than a little concerned. However, much as one welcomes that emphasis, because of the selective way in which it has been used, it does not mean that one would welcome the same degree of emphasis on indirect taxation in future Budgets. We are facing a special situation, and this is a special Budget.
Having said that, I think it is surprising that some aspects of indirect taxation have escaped as lightly as they have. For example, in a Budget which in a full year will raise £900 million of taxation, I am surprised that the extra taxes on tobacco, wines and spirits, and betting and gaming will raise only an extra £75 million. That is an extraordinarily small proportion of the total extra demand which is made on taxpayers. Given the gravity of the present situation, I am surprised that the increases were not larger. To bring it down to a personal level, I find it a little illogical that I do not pay more for the glass of beer that I buy but that my young son must pay more for his bottle of lemonade and that my daughter must pay more for her ice cream.
I turn now to a point mentioned by my right hon. Friend when he opened the debate, which he referred to as
a small change in National Insurance benefits".
It is a good deal more than a small change to those whom it will affect. My right hon. Friend said:
We propose to discontinue the payment for the first three days of sickness, injury or unemployment which is at present made after a period off work has lasted for a fortnight."——[OFFICIAL REPORT, 19th March, 1968; Vol. 760, c. 266.]
In reply to an intervention earlier today, my right hon. Friend the Chief Secretary said that this measure would raise the sum of £15 million. It is a rather shabby proposal. One penny on a packet of 20 cigarettes would have raised this £15 million, and it would be more socially desirable to put a penny on a packet of cigarettes than to abandon the payment of the first three days' sickness and unemployment benefit to those who are off work for more than 14 days for one reason or another, more especially as in many cases they will be the people who are hit hardest by the reintroduction of prescription charges of 2s. 6d. per item. This is an example of


the Treasury's prescription charge mentality, and I believe that there are other reasons for it than purely economic ones.
I hope that my right hon. Friend will assure the House tonight that, together with his colleagues at the Ministry of Health, the Ministry of Social Security and any other departments or voluntary organisations which are interested, he will give serious consideration to the consequences of this change. Having looked closely at the situations of people affected by it, I hope that it will be found after 12 months that the decision should be reconsidered and that, in a time of improved economic circumstances, it will be possible once again to reintroduce the payment of benefits for the first three days to those who are off work for more than a fortnight. If it is not done, we shall put an additional burden on those who are least able to bear it; for example, those on low wages, those in parts of the country where unemployment is abnormally high and where sickness runs at a higher rate than elsewhere, which in many cases are the poorer parts of the country.
I turn now to one or two of the regional implications of the Budget. I represent a constituency in a development area which faces serious and difficult economic problems. Inevitably, I must be concerned about the proposal to raise the Selective Employment Tax contributions by no less than 50 per cent. In my development area, the proportion of manufacturing industry is very small, and my right hon. Friend's proposal means an increased burden on the community as a whole. The development areas have borne the brunt of successive measures—not only the introduction of Selective Employment Tax but some of the other economic measures which are justified in a national sense but which produce anomalies and injustices in a regional sense. These areas—my area in particular—already have low wages and high unemployment rates and are not fully capable of bearing extra burdens.
For these reasons, I particularly welcome the proposals to give certain benefits to the tourist industry. I also welcome the proposals for some S.E.T. relief for part-time workers and for elderly workers. I wish these measures had been introduced some time ago, but I nevertheless welcome them now. There are two proposals to

help the tourist industry. There is the scheme for giving assistance to hotels. There is also the proposals for S.E.T. refunds to hotels in certain parts of development areas. Why select only hotels? Other parts of the tourist industry play an important and, in some parts of the country, an increasing part in our economy. I think in particular of camp sites, restaurants, cafeterias, cafés, and so on.
I welcome the scheme for giving assistance to hotels—the scheme for hotel development grants and loan assistance. This will help the tourist industry, although I think that the differential between non-development areas and development areas is rather niggardly and miserly. The difference in the degree of assistance is that the grants will be 25 per cent. in development areas as opposed to 20 per cent. in the rest of the country. The loan assistance will be much the same. Could not the differential be greater?
I welcome the scheme for making S.E.T. refunds to hotels in certain rural areas, first because it will provide a significant stimulus to the economy of some of the tourist parts of our development area. I welcome it also because it creates precedence. For the first time, we have a real breakdown in the rigid classification laid down when the tax was introduced.
This underlines what has been becoming increasingly obvious for some time. The classification of industries for the purpose of Selective Employment Tax is not necessarily equally valid for the whole country. A classification that is right and reasonable in the City of London, for example, is not necessarily right and reasonable in Cornwall, in the north of Scotland, or in the mining areas of the North-East. I hope that Mr. Reddaway, in his investigation of the workings of the Selective Employment Tax, will examine the possibility of the variation of the classification of industries into three categories from region to region according to the needs of the region.
Last week my right hon. Friend the President of the Board of Trade said that the refunds will be made available to hotels in
certain rural parts of development areas".


My right hon. Friend did not go on to define that. In answer to an intervention he said:
details will be given in the Finance Bill."—[OFFICIAL REPORT, 20th March, 1968; Vol. 761, c. 456.]
In a Written Answer to me today my right hon. Friend says the same thing.
I realise that the Finance Bill will probably be published in the fairly near future and we can then get an idea of what is meant by
certain rural parts of development areas".
Normally I would not pursue this matter, except for the fact that a great deal of publicity has been given to it in the last three or four days in some of the development areas. In particular, I am concerned about a radio broadcast from the South-West which said that this benefit would go only to towns with populations of less than 10,000 and to completely rural areas. I have no means of knowing whether this is the intention of the Government Departments concerned.
If it were to be the intention, I should be very disturbed, because it would create a patchwork situation throughout many development areas. In the South-West S.E.T. relief would be given in St. Ives, but not in Penzance; in Penryn, but not in Falmouth; in Ilfracombe, but not in Newquay. Such a situation would be utterly illogical. Whereas most of Wales would obtain S.E.T. relief, Colwyn Bay would not. Whereas most of the north of Scotland would obtain relief, Inverness would not.
If this decision has not yet been taken, I ask my right hon. Friend seriously to consider whether whole areas should not be made development areas in which S.E.T. relief would be given to the hotel industry, rather than working it out on a patchwork arrangement. For example, would my right hon. Friend consider providing that the whole of the South-West development area, the whole of rural Wales, and the whole of rural Scotland, should automatically obtain this concession? Should not the same apply to the whole of the north of England, except the densely populated urban areas?
I think that the Budget, given the critical economic situation that we now face, is reasonable and fair. I have been critical of certain aspects, in the same way

as every hon. Member could be. If we watch the situation of the lower paid workers, if we watch the problems of the poorer regions—the areas which have all too often been left behind in the past—and if we take the necessary action, if it is seen that either group is suffering as a result of the Budget, I think that the Budget can and will make a significant contribution to the solution of our economic ills while fairly sharing the burdens which have to borne throughout the whole community.

8.16 p.m.

Mr. Richard Hornby: It would take too long to answer all the points raised by the hon. Member for Falmouth and Camborne (Dr. John Dunwoody). I will content myself with commenting on his concluding statement that the Budget was about right, in his view, as long as proper care was taken for his area and for his interests. This is precisely the danger we must all guard against in our speeches. It is all too easy to make special exceptions.
I turn to the three objectives which the Chancellor set out at the beginning of his Budget speech—facing the facts, imposing the hardships, and creating the opportunities to make devaluation work. As objectives, those were fair enough, provided that we create the opportunities. If we do not do that, we just have a prolongation of national decline, and that does none of us any good. My comments, therefore, will centre as much as possible round the creation of opportunities and on the question whether we shall succeed in doing just that. As the right hon. Member for Battersea, North (Mr. Jay) said earlier, devaluation is not enough by itself. Nor is the Budget enough by itself.
I thought that the Chancellor presented the facts to us fairly enough. I certainly would not quarrel with them, though I would quarrel with some important omissions. There is no doubt that we must recognise and accept our own contribution to the monetary crisis that is in the back of our minds. That crisis is still with us, and as the Daily Mirror said in a leading article last week, which made better reading for the Chancellor than for the Prime Minister,
We are still living on borrowed time and borrowed money".


The second omission from the Chancellor's statements that we should remember is his own delay in restraining consumer expenditure and the contribution that that has made to the severity of his Budget. The Governor of the Bank of England was right in saying:
I devoutly wish that the full range of governmental measures necessary to make devaluation work and preserve its benefits could have been launched together months ago.
Thirdly, it has made no sense that the Board of Trade figures for February sales of consumer durables in the stores should have shown an increase over the equivalent weeks last year of 16 per cent., 19 per cent., 18 per cent., and 17 per cent., and this at a time when we are trying to restrain consumer expenditure.
Lastly as to the Chancellor's omissions, it has made no sense that the mood of "backing Britain," which was a very important factor at the time of devaluation and in the week after that, should have been allowed to evaporate into a spending spree. This was a very badly missed psychological opportunity for which the Chancellor of the Exchequer, just as much as any other member of the Government, is responsible.
Next, the Chancellor glossed over the continuing rise in the public expenditure figures—up 2 per cent. to 2½ per cent.—at a time when he suggests that everything is being cut back and at a time when private expenditure is being cut back. I fully recognise that this is music to the ears of some hon. Members opposite. I think that it was the hon. Member for Ashfield (Mr. Marquand) who said on Thursday that there had been
a really heroic shift of resources to public expenditure …"—[OFFICIAL REPORT, 21st March, 1968; Vol. 761, c. 654.]
When questioned, he welcomed the prospect of yet higher taxation to come. It is precisely this attitude in the ranks of the Government's supporters which makes it so hard to see how we can grasp the opportunities which could just be there.
On the question of hardships to which the Chancellor referred, I have no quarrel with the size of the taxation increases, despite the risks of a trade recession which they could trigger off. The measure of the Government's failure is that one should be forced into the position of saying just that. I say that I have no quarrel with them, because I believe that

to have underestimated would have been fatal in the present condition of confidence about the finances of this country. I think the right hon. Gentleman may also find that he will draw in less revenue than he has anticipated not least because of the spending spree which has occurred, and to which I have referred, and I think—though this is slightly contradictory to my previous point—that he has to insure against the possible failure of his incomes policy. Broadly speaking I think that the Chancellor, because of the fault of his predecessor, had no choice but to raise something like the massive sum that he has decided to raise.
Now for the opportunities. Can we profit by devaluation? Can we profit by the medicine which the Chancellor has administered to us through the Budget? We can, I believe, but not on present policies alone, and certainly not on this Budget alone. My reasons for saying so are these: first, owing to Government actions which have taken place, a good deal of the 14 per cent. price advantage of devaluation has been lost. The effects of S.E.T. on the service industries, as well as in other places, the effects of the Transport Bill and the likely effect on transport costs and on delivery dates, are two examples that I quote.
The price opportunities arising out of devaluation are likely to be pared down pretty thin, and I think that devaluation has to be supported, again as the right hon. Member for Battersea, North said, by paying considerably more attention to other areas of export support—the importance of communications, the importance of rapid action by supporting Government Departments, the Board of Trade, the Foreign Office, and others when inquiries come their way, the importance of marketing skills, and of labour relations to which I cannot refer now.
The second thing which I believe is necessary if the opportunities are to be seized is to pay much more attention to the need for incentives to work, to save, and to innovate. For this reason, the Chancellor was right to place the emphasis of his taxation demands on indirect taxation, but he will prove his virtue only if he can announce, and ultimately carry out, a reduction of direct taxation before he makes any reduction in indirect taxation. I suspect that he may know the


advantages of this, but I am certain that there are many Members of his party, as we have heard from one speech, who are very much opposed to this course.
Why is it that on this side of the House so many of us have urged the importance of a gentler attitude towards direct taxation? First, and the Chancellor mentioned this in his speech, there is far too much unproductive work going into the business of getting round the tax laws, a direct product of over-high taxation. Secondly, a great deal of attention is being given to part-time work of one kind and another for cash payments, unknown to the Inland Revenue. Thirdly, there is the brain drain itself. We know that 6,200 engineers and scientists left the country in 1966, the rate of migration doubling between 1961 and 1966. In addition, between 2,000 and 3,000 doctors and teachers have left the country, and more than 2,000 industrial managers have gone to the United States, Canada, and Australia alone. This is due, not wholly, but at least in part, to the incidence of our tax structure as it now affects them.
I believe that there are other reasons also why the pattern of direct taxation is damaging to the prospects of seizing the opportunities arising out of devaluation. The effect of limiting key salaries at the very top of major corporations and companies reduces the scale within which there is room to reward managers at the intermediate level. There is a real disincentive to productivity schemes in wage freezes of the type with which we are likely to be confronted. These damages will continue if the Chancellor does not find room in his Budgets in future years to change this pattern of taxation and remove some of the weight of direct taxation in particular.
Having said that, I recognise that there was no room for a reduction of any form of taxation in this Budget. I think the Chancellor has to indicate that that is his intention if he means to show any light at the end of the tunnel, and to give some hope to those whose enthusiasms he is trying to revive. Without doing that, I do not believe that this attempt to get the economy moving and working effectively with our resources will succeed.
We have to remind the country again, and it is here that I question both the

will and the ability of the party opposite to do so, that as with Peel and Gladstone in the last century, and as with the Tory Party in the 1950s, it is possible to reduce taxation, and at the same time to acquire a larger, and not a smaller yield, for public purposes, which is wanted. Only if the Chancellor can educate his party to that has he a hope of making the policies outlined in his Budget succeed.
Lastly, I propose to say a few words about public expenditure. The Chancellor can make room for some such encouraging tax reductions in the future as I have described only if he takes the sort of grip on public expenditure which has not yet been taken.
I recognise that there is bound to be a propensity for some public expenditure to grow, not least because there are many things which can be done, because of their scale, only by some injection of public capital in the investment field, and not least, also, because as salaries and wages in the private sector rise so must the salaries and wages of those in public employment rise more or less commensurately if there is to be any prospect of the public sector recruiting the people of ability that it needs.
If that is the case there is all the more need to look searchingly at the whole of Government activity in order to see where savings can properly be made and to allow growth in public expenditure where it is most needed. It is in this respect that the Government have been grossly failing in their duties.
In the time available I do not want to detail specific areas in which I suggest the Government should look. I can say, however, that some of the points raised in our debate on the growth of bureaucracy are relevant to the points at issue, and also that I do not believe that the Chancellor and the Government can afford to heed the all-pervading criticism of any type of consumer charges which so many hon. Members opposite have expressed.
In this Budget the Chancellor has taken very nearly the only course open to him. For that reason we can commend his courage—although the fact that he has to take the only course open to him does not add up to a measure of the wisdom of the Administration, when other doors have been closed by the policies of his


predecessor's. This is only an emergency part of the kind of measures which are needed to set the country on its feet and enable is to profit—as it can just profit, still—by all these measures. The remaining part of our policies must be designed to provide far greater encouragement to personal endeavour and enterprise, and far more stringent control on some aspects of Government policy. Only in this way can I see any prospect of these measures succeeding, as we are bound to hope that they can succeed.

8.30 p.m.

Mr. James Dickens: The hon. Member for Tonbridge (Mr. Hornby) has made a characteristically thoughtful contribution. I hope that I shall be forgiven if I do not take up all the points that he made. I note in passing, however, that in his general onslaught on Government spending even he funked getting clown to details and telling the House precisely which items of public expenditure he would cut.
During the course of the three-and-a-half days that we have had of this debate it has been interesting to hear the continual recital from hon. Members opposite of the need to cut public expenditure in general without making any specific reference to those items where expenditure should be cut.
I want to add my voice to those right hon. and hon. Members who have commended the Chancellor's presentation of his Budget. The Chancellor's speech last Tuesday was the best presentation of the Government's case that I have heard since my arrival in the House two years ago. Given the economic strategy upon which the Government have embarked the Chancellor has done all that could reasonably be expected of him in trying, within the strategy, to achieve a proper proportion between personal consumption and public expenditure, and in trying to relate this to the post-devaluation strategy designed to achieve more rapid economic growth, with a high rate of employment.
However, since I attack this strategy at its roots I cannot find myself in agreemment either with the general tenor of the Budget or with what has preceded it. We have to see the Budget as part of the packet of measures that we have had since devaluation in November, 1967. People tend to forget that immediately after

devaluation the Government introduced measures designed to take between £750 million and £800 million out of the domestic economy by cutting certain items of public expenditure, such as taking away premiums in Selective Employment Tax and withdrawing the export rebate besides making cuts in public sector investment.
All this, added to an 8 per cent. Bank Rate and much more stringent conditions on bank overdrafts and loans with the consequential increases in prices following devaluation, totalled between £750 million and £800 million. To this we have added cuts in public expenditure in 1968–69 of about £325 million as announced by the Prime Minister on 16th January. Now a further £500 million is to be taken out of the economy in 1968–69 as a consequence of the Budget. Therefore, in all, we will take out of the economy in 1968–69 not less than £1,500 million, and perhaps more.
Are these measures necessary to make devaluation a success? Yes, they are, if the Government are not intent on a strategy designed fundamentally to reappraise this country's world financial rôle for the rest of the century and beyond. However, a growing number of us on this side of the House and in the country are now demanding such a reappraisal and we cannot accept the Chancellor's premise. Looking at the matter as objectively as possible, I must say that the Chancellor and the Government have a chance of succeeding with their present policy, but that the odds are overwhelmingly against them.
A fundamental part of their strategy is the hope that, in 1968–69 or soon after, we will achieve a balance of payments surplus of £500 million. Such a figure is totally unrealistic and, against the present pattern of world trade, it is, to put it at its kindest, sheer naivety for my right hon. Friends to appeal from the Front Bench, as the President of the Board of Trade and other Government spokesmen did in the debate, to the Federal Republic of West Germany and other European countries to reduce their massive surpluses on balance of payments to help this Government out in this situation.
If there were a more orderly pattern of international trade, perhaps a world


Socialist pattern, we might make such requests, but it is the height of folly to imagine that there will be any positive response from any sovereign Government to this appeal today.
This brings me to the immediate international background to the Budget. Many right hon. Members, most notably the right hon. Member for Stafford and Stone (Mr. Hugh Fraser), who made an interesting speech, have drawn attention to the significance of the gold rush immediately before the Budget. Many have mentioned the mood of the House ten days or so ago, when we heard dramatically that the Government had decided to close the banks for foreign exchange purposes. I said then and I repeat now that what we saw a fortnight ago revealed for all to see the basic greed, stupidity and anarchy of international capitalist finance.
It struck many of us as remarkable that this country could allow currency speculators to operate in London to the detriment of our own currency. We saw the wholesale selling of £s sterling, to purchase dollars and then to buy gold with those dollars. This led to a totally bogus run on the pound. It meant that the hard-earned credits which we had obtained in the autumn of 1967, as outlined in the Letter of Intent on 23rd November, were being put at risk, and that some of the money was being used to support the £ without the machinery of exchange control.
One must also view the Budget against the background of the American position. America in 1967 is estimated to have operated her international trade at a deficit of 3,700 million dollars. The Times correspondent in Washington said of the deficit and of the significance of the Vietnam war in relation to that deficit that what was not arguable in the total sum of the American balance of payments problem
… is the cost to the American balance of payments of the Vietnam war. This drain on American monetary reserves has been widely played down and is still under-estimated. The truth is that the rising foreign exchange costs of defence last year have eaten up all the other efforts"—
of the American Government—
to reverse the payments deficit. The Administration put the Vietnam foreign exchange bill at 1,500 million dollars. Defence is a necessary item, but a close correspondence

between the payments deficit reported for 1967 of 3,600 million dollars and the direct drain on foreign exchange in prosecution of the Vietnam war is undeniable. Obviously the two items are not interchangeable. The fact remains that the United States would not be in trouble over its balance of payments if it were not for the fighting in Vietnam.
What clearer case could there be for this Government now acceding to the popular demand that we dissociate Great Britain from the American aggression in Vietnam? The American aggression in Vietnam is not merely a matter of the politics of international relations, not merely a question of morals or ethics; it is also a major economic burden on the whole Western economy.
Seen against that background, the American Government must soon take major steps to get their balance of payments position put right. These measures must react unfavourably against this country's export prospects. To go ahead, therefore, and, as it were, to put our whole arguments and the whole basis of the strategy on the prospects of achieving a massive turn-round in the balance of payments of about £1,000 million in all—taking into account the deficit in 1967 of £540 million and the hope for a balance of payments surplus next year of £500 million—is unrealistic. Such a turnround is unattainable. Moreover, seen against the present condition of international liquidity it is positively undesirable, because all that is meant by this vast accumulation of surplus is that other countries would inevitably find themselves in deficit. To put this as the centre point of the whole strategy is fraught with danger.
I turn now to discuss some aspects of an alternative policy which my hon. Friends and I have been urging in recent months. We deny that this is the only way forward for our country. We think that we should start by using the tools of Socialist economic management to get our priorities right at home. We have no wish to insulate this country in any protectionist or isolationist way against the trends of world economy, but we have every right to use physical controls to protect our own currency and our own economy at home when we think they are unreasonably at risk.
We should, therefore, have reintroduced exchange controls immediately after devaluation and certainly we should


have introduced them in the weeks immediately prior to the recent gold rush. In his earlier writings, for example, in his book in 1953, "Pursuit of Progress", my right; hon. Friend knew the significance of maintaining the exchange controls which were then in operation. Unfortunately, during the later 1950s the Conservative Government, in their desire to restore the prestige of the City of London and in their desire to throw the whole of the British economy open to the discipline of the international market economy, withdrew exchange controls.
I want to see them reintroduced, with a suspension of sterling convertibility, together with a freeze on the sterling balances, with repayments subject to international agreement. I want to see the mobilisation of our overseas portfolio investment in North America and central Europe, not to enable us to live with another balance-of-payments deficit but to buy gut some of the more volatile short-term sterling balances and to help fund our long-term debts to the I.M.F. and to the Bank for International Settlement.
I want a standstill on direct private investment abroad. I totally disagree with hon. Gentlemen opposite who argue for a relaxation of such control as now exists. It is sheer nonsense to argue that we have any commitment now to build up Australia, South Africa, Canada or any other advanced industrial country. I want to see a complete cessation of the net outflow of private direct investment to advanced countries abroad and, moreover, a return of at least 25 per cent. in terms of remittances on profits made there to this country.
We must also consider certain short-term steps which are inevitable in present circumstances. In 1967 there was a considerable increase in the import of manufactured and semi-manufactured goods into this country. So long as we are in deficit, we are entitled, under the provisions of G.A.T.T., to reintroduce import controls of a selective short-term nature. I am not particularly enthusiastic about this because I believe in unrestricted international trade. However, in present circumstances, the position is so critical that we would be right to introduce them for luxury goods and semi-manufactured consumer goods.
The Government have recently taken some steps to reduce the defence burden. In his Budget speech, the Chancellor said that we now had a realistic defence policy and, in support of that, he made the astonishing assertion that British defence spending was now broadly comparable to that of other West European nations. I hope that when he replies to the debate my right hon. Friend will produce some evidence for that remark. All the published information indicates that we are still spending far and away the greatest percentage of the G.N.P. of any European nation outside the Soviet Union on defence. In the most recent year for which statistics are available, we were spending 6·5 per cent. of our G.N.P., and even for 1968–69 it will be 60 per cent. That is significantly higher than France or Germany and very much above the rate of 4 per cent. attained on average by our trading rivals in the E.E.C.
I want a planned export drive, through a Ministry of international trade with taxation penalties for firms and industries which deliberately lag behind export targets. I want to see, within this strategy, a much more rapid rate of economic growth as recommended in the admirable T.U.C. "Economic Review", and in the transformed Guardian editorials in recent months.
My right hon. Friend has settled for 3 per cent. for 1968–69. That is below even the earlier Treasury estimates and it is a figure which has been forced on the Chancellor by the O.E.C.D. and I.M.F. economists with whom he was recently in consultation. If one accepts 3 per cent. as the rate of economic growth for 1968–69, there is then no argument about how much one can devote to an increase in personal consumption. The cash simply is not in the kitty. But if one is prepared to strengthen the economy in the way I have described one can within this framework look towards a rate of growth of 5–6 per cent., as the T.U.C. advocates, by getting a further increase of 4 per cent. due to increased productivity—now rising very rapidly—a further 1 per cent. due to the increase in the hours worked in industry and a further 1 per cent. due to the increased take-up from unemployment.

Sir Cyril Osborne: May I ask a question?

Mr. Dickens: I am sorry, not this evening; I am afraid that I must make progress because othersw ish to speak.
This figure of 6 per cent. is attainable. It would produce an increase in the gross domestic product of about £2,000 million, as the T.U.C. is arguing. Within the global sum of £2,000 million one could go for a balance of payments surplus of, say, £200 million per annum, not £500 million, and could, in turn, devote £700 million to private and public investment, and would have something in reserve for increased personal consumption.

Sir C. Osborne: May I ask a question?

Mr. Dickens: This would allow for an increase in wage rates of about 3½ per cent., plus 1½ per cent. for locally negotiated collective bargaining. I am not one of those who argue for free collective bargaining. Some of my hon. Friends do so, and I respect their sincerity. I have always supported the need for an incomes policy, but I want to see a voluntary one.
I put it to my right hon. Friends that, if the Government are determined to go ahead with the introduction of statutory wage regulations and legislation, they would be disregarding the offer from the organised Labour movement to proceed on the basis of a voluntary policy for prices and incomes By resorting to compulsory methods they will not make devaluation or anything else work. They will simply produce in the summer and autumn the likelihood of a succession of industrial disputes over money incomes of the type that we had with the Seamen's strike in 1966. This could wreck the prospects for industrial recovery. I urge my right hon. Friend to think again on this vital matter.
In our alternative strategy we have a prospect of re-appraising our country's total world financial rôle. I think we could then get away from the highly regressive types of Budget that we have had in the recent past, of which the present one is an example. There is not the slightest doubt that the people who will bear the burdens as a consequence of the Budget will be those with average earnings or below. It is worth remembering that when one does not increase direct taxation but at the same time markedly increases indirect taxation one adds to the regressiveness of the existing

taxation structure. In respect of incomes and earnings of £1,750 per annum and below we now have a position where the progressiveness of Income Tax has been overtaken by the regressiveness of indirect taxation.
So I ask my right hon. Friends to indicate to the House where the Government now stand on the items on which I have elaborated. What is their policy now on the alternative economic strategy, on exchange controls? How much, for example, of the gross domestic product do they intend to devote in 1968–69 to increased money incomes? We never had that from the First Secretary on Thursday. That is a critical and key factor.
I think that the Government have a chance of succeeding with their strategy, but the odds, as I have said, are heavily stacked against them. I urge them instead to show a willingness to move towards the position that I have indicated. By so doing, we can build an improved economic position for Britain in the remainder of this decade and into the 1970s.

8.55 p.m.

Mr. John Smith: This Budget raises an unprecedented sum of money, much of which will come from my constituency, the City of London. It has been discussed on both sides of the House as a bankers' Budget. I am a banker. Indeed, I think that I am the only banker who has sought to speak in this debate. This is also a debate about international currency—about gold, about the reserves—and that is my trade. But these matters cannot possibly be dealt with in five minutes and, therefore, with your permission, Mr. Speaker, I will try to take the opportunity on another occasion of addressing the House on these subjects, about which I clearly know a great deal more than some of those to whom I have had to listen during these days of debate.

8.56 p.m.

Mr. Reginald Maudling: I am sure that we are all sorry that my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) did not have a more extensive opportunity to speak on a subject about which he rightly says that he knows a great deal, by virtue both of his personal


experience and his Parliamentary position. I start by explaining on behalf of my right hon. Friend the Leader of the Opposition that, as he has told the Chancellor by letter, he has a public engagement, made long before the date of the Budget was fixed, which means that he will not be able to be here for the wind-up of the debate.
As the Chancellor is well aware—and certainly it is my experience—reactions to Budgets change. The first reaction is never a lasting one and I doubt whether the hosannas which greeted the Chancellor from his benches will be their lasting reaction. Certainly, the many genuine interests affected by the Budget will make themselves more and more felt—the hotel keepers, the motor industry, the motorists at large, the transport industry, the Scottish whisky industry, even the lawyers. It is extraordinary with what a wide sweep the Chancellor has cut across the legitimate interests of the people of this country. The right hon. Gentleman will, therefore, find that the mood of welcome for a brave attempt will change to resentment that the Budget was ever necessary and to doubt as to whether it really suffices to help the country's needs in finding a solution to its problems.
We on this side intend to vote against the Budget as a whole, not because we deny in any case the need to take out, as the phrase goes, a large amount of purchasing power, but firstly, because we disagree in many ways with the methods the Chancellor has adopted—for example, his lack of doing anything like enough to reduce Government expenditure or to encourage savings—and, secondly, to register a protest, which will be increasingly echoed throughout the country, at the necessity brought upon the country by the mismanagement of our affairs by the Government and by the total collapse of confidence at home and abroad in their ability to conduct our country's affairs. It is because of this that we vote tonight.
First, I want to deal with the background to the Budget. This was a simultaneous threat to the £ and the dollar and there was, and remains, a real danger of a world trade crisis and a recession on a scale we have not seen for many years. Of course the weakness of the £ contributed to the weakness of the dollar. Of course there can be no denying that it was devaluation of sterling which touched off

the gold crisis which brought about the present situation. Of course I agree that the American deficit and the drain upon the American gold stock have worried the Western world for many years, although, on the other hand, the persisting American deficit has been and will remain essential for liquidity to finance world trade.
It was this growing problem which led me, in 1962, as Chancellor of the Exchequer, when I went to the I.M.F. meeting, to put forward proposals to solve these problems. We said quite frankly that the world was in danger of running out of cash, that there were gold and the sterling reserve currency, which could not be indefinitely extended, and a growing limit to which the obligations of the dollar as a reserve currency could be extended.
We therefore pressed in 1962 for agreement among the nations for some new form of reserve asset which would not supplant sterling and the dollar, but supplement sterling and the dollar. Progress, of course, has been slow. At first, the Americans were not enthusiastic, although they changed their minds, and subsequently political trouble arose and there was the French monetary aggression, as it became, against the dollar in recent years.
We must remember that the Americans can always cure their deficit by ways which would harm the rest of the world, either by a restrictive trade policy, or by domestic deflation, but domestic United States deflation would bring very great problems to the whole world, including ourselves. What we should say at the present stage is that the two-tier gold system clearly is not a final and lasting solution. I believe, though, that it can last long enough to enable the countries of the West to establish a satisfactory alternative, but we must recognise the problems which still remain to be solved. What will happen to the South African gold sales? Will they go into the official pool, or be sold through the free market? How can the American deficit be cured by means which do not involve a severe depression of international trade?
We must clearly press on, as I hope the Chancellor will, with the special drawing rights, making them as large and as progressive as the new situation demands. I hope that the whole question of the sterling balances can be looked at


again. This is an opportunity for some funding of the external balances, some bringing together of the short-term balances into long-term obligations. I myself tried to do this, when I was Chancellor of the Exchequer, with some of the European Governments, but the time was not then ripe. I hope that the present Chancellor will have some opportunity now to tackle this problem, because its solution is clearly in the interests not only of this country, but of the world as a whole. Whatever is done about the other problems, it is quite clear that the British balance of payments is essential not only to this country, but to the monetary health of the whole Western world.
This is the background to the Budget and this is why, after devaluation, the Chancellor has to plan for this vast shift of resources out of consumption into investment and into exports. The total the Chancellor has taken is certainly enough—there are some who think that it is too much. But is it the right mixture and will it work? These seem to be the problems which we must consider.
The Chancellor bases his Budget on his tax increases and on his incomes policy proposals, and he claims that both are interlinked and that both are necessary. I agree with him to the extent that excessive wage and other income increases will certainly lose the benefit of devaluation. I also agree that in their situation the Government had no option but to intensify wage restraint. They were committed to this by the Letter of Intent of last year and committed to it even more by the facts of the situation. Here my agreement with them ends.
The necessity which they face is a necessity of their own making. The situation with which they have to cope has arisen because of their mishandling of the economy and because of their mismanagement of the incomes policy to date. To quote—my only quotation from myself—what I said in July, 1966, when I warned the Government on their prices and incomes policy:
… in practice the introduction of compulsion will destroy the voluntary principle and will, therefore, lead the Government step by step"—
as they themselves appear to envisage—

down the road to complete control of the economy, wages and prices alike."—[OFFICIAL REPORT, 14th July, 1966; Vol. 731, c. 1763]
That was a fair prediction and that goes a long way to explain the predicament in which the Government now find themselves.

Mr. Michael Foot: rose—

Mr. Maudling: I am sorry, I have very little time. For that reason, because the necessities they face are of their own making, I cannot any further agree with them.
Secondly, I cannot accept the dog's breakfast they have produced by way of incomes policy. The House knows that I have long believed in the need for an incomes policy, but its basis should be voluntary and its purpose should be clearly positive, to ensure that real incomes rise as rapidly as possible. This at times clearly means restraining the growth of money incomes to what the economy can afford. This is what I understand by incomes policy.
I believe it to be necessary for this reason, because inflation is the endemic disease of any democracy. This disease has two strains. The "cost-push" inflation and the "demand-pull" inflation. Neither of these can safely be neglected. The sheer volume of money involved in income increases is very large, indeed. A 1 per cent. increase in disposable incomes is £250 million or more, so a 2 per cent. increase is probably more than what the Chancellor is taking out of consumption by this Budget.
Some confusion has been caused by estimates that a successful incomes policy can only reduce the need for tax increases by very little. This is because rising incomes cause rising prices and these choke off the demand they create. I am wandering a little into the twilight world of economists and Chancellors of the Exchequer, where rising prices, which are the symptoms of inflation, are used as the cure for inflation, a kind of economic homoeopathy. The real truth is that the result of incomes rising too fast is that prices will rise too fast, and if that happens then a lot of the benefits of devaluation are bound to be lost. We cannot afford to lose any more of the benefits of devaluation, because so many


have already been frittered away by the policy of the Government.
Having said this, I cannot support the proposals, first because they are clearly designed to be permanent and not temporary. Secondly, I cannot support them because they contain many illogical features. The treatment of rent and rates is an example. The Secretary of State for Economic Affairs said the other day that it was not necessary to say that because rents did not go up rates would have to go up—there was some other source of money. I wish he would tell us what it is. Then there is the treatment of dividends, the illogical treatment of bonus shares. In these proposals there are many sheer illogicalities. Basically the proposals, particularly put forward by the Secretary of State, are incomprehensible and ineffective. They are obscure in intent and application.
The Secretary of State had no idea of what was intended in the fixing of piece rates, one of the most important things in industrial settlements. There are so many loopholes in the Government's proposals that the results can be neither fair nor orderly. There is such reliance on the Prices and Incomes Board that it is bound to be overwhelmed by the amount of cases put to it.
Without retrospection, upon which the Government are not to work, this will mean postponement, and not an effective reduction in the amount that would otherwise be added to incomes. For all these reasons the Government's proposals will not work, and great damage has already been done to voluntary co-operation. Much more will be done for very little practical result.
In particular the prospects of getting more productivity deals will be sadly undermined. I saw in the papers this morning details of what looks like a most interesting productivity deal in the electrical industry. It is along these lines that productivity deals will have to move, and real progress will be very stultified by the Government's proposals. For that reason I cannot in any way support what they are proposing in the way of an incomes policy. I do not believe that it can possibly work.
I turn now to the main Budget proposals, in taxation. There are many

detailed points which will have to be thrashed out in the debates on the Finance Bill, many of which have already been referred to, particularly by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin)—the strange retrospective treatment of policies under the Married Women's Property Act; the provisions for aggregating children's income with their parents, which will give rise to many anomalies; the rather strange provisions to deal with people who are sick and who lose their first three days' payment. Apparently £15 million will come from this. It must come out of their pockets. It is a very large amount which has not been properly explained. There is the whole question of the treatment of family allowances—the outgoing money, on the one hand, and the tax relief, on the other. We are not satisfied that the scheme proposed by the Chancellor of the Exchequer is workable. We certainly are not satisfied that it goes to the heart of the problem of those most in need.
The Selective Employment Tax is surely immensely damaging, particularly to the invisible exports of this country. May I give an example from my own experience? Sixty per cent. of the income of an insurance broking company with which I am connected is earned overseas. Its export record is far better than the average of manufacturing industry, but it has to pay S.E.T. on all its employees. Surely this cannot make any sort of economic sense. We on this side would agree that there may be a case for taxing the costs rather than the profits of industry. If we do it in that way, we give the benefit to the more efficient firms which turn over their capital more rapidly. But to distinguish in this way between manufacture and distribution is an absurdity increased by the new imposition in this Budget.
As I said earlier, we believe that there are two important alternatives to increased taxation, even in these drastic circumstances. The first is further to reduce Government expenditure, and the second is further to encourage saving. Both are clearly alternatives to taxation. Every £ saved in Government expenditure means a £ less needed in taxation. Every £ saved and invested means a £ less to be taken out of consumption by way of taxes.
There is no doubt that Government expenditure has got out of control. The Chief Secretary was very cross today that this should be suggested about a Department and activity over which he presided, but how can he possibly argue against the proof of the Supplementary Estimates? The vast scale of those figures alone shows quite clearly how little effective control has been exercised recently by the Government over their own expenditure. They have persisted in a high level of expenditure based on plans for national expansion which have totally collapsed. Despite the fiasco of the National Plan on which their expenditure programme was based, they still persist, and this is at the root of many of the problems which we face.
The Government have tried to minimise the sums involved, but they cannot escape the facts. Last year's estimates of Consolidated Fund expenditure were £10,359 million. This year's Estimates, after the Budget proposals, are £11,489 million, or an increase of £1,130 million. By any standards, this is a shattering increase in expenditure which the Government and the Chancellor of the Exchequer cannot possibly explain. Eleven per cent., on my calculation, is a shattering increase. I know that it was said in the Financial Statement that public expenditure in real terms would be going up by little over 2 per cent. But public expenditure, or public consumption in real terms, is only part of the story. While public consumption goes up, private consumption, for I think the first time in history, is planned deliberately to be brought down.
Real terms are not the whole point. Money matters very much indeed to the taxpayer. It is not merely the figure of 2 per cent. in real terms which matters to him, but the 11 per cent. in terms of money out of his pocket. There is more than one reason for the difference between the 2 per cent. and the 11 per cent. There is the addition of transfer payments. But largely the difference must arise from the very great increase in prices which the Government are expecting. If I am correct, the public consumption figures are in real terms the public expenditure figures in money terms, and the large difference must arise from the fact that the Government are

budgeting for a 7 per cent. increase in prices this year.
I am glad that the Prime Minister is here, because I have asked him several times recently to give the figure of the Government's expected increase in the level of prices this year. He has been a little coy about it. I am sure that he will not be coy about it this evening but will leave it to his right hon. Friend the Chancellor of the Exchequer to produce that unpleasant figure for him. I certainly hope that in his reply the Chancellor will do so, because it is an important figure. On the basis of all the calculations that we on this side can make, it looks as though a figure of something like 7 per cent. or more may be what the Government are aiming at and expecting this year.
The Chancellor has tried to minimise the increase in expenditure by comparing the Estimates for this year with the out-turn for last year. That is one of the oldest of tricks and is quite unworthy of the Chancellor of the Exchequer. The proper comparison can only be of like with like, Estimates with Estimates. This comparison, as I have said, is an increase of £1,130 million and not the £434 million which was given in the Budget speech. The main difference is accounted for by the enormous Supplementary Estimates for the last financial year, but, despite the optimism of the Chief Secretary, no one else in the House will assume the same thing will not happen again.
One excuse which was given to the House for the higher Supplementary Estimates was that last year's Estimates were drawn very tightly. What does that mean? Was it a trick? Were the Estimates minimised? I do not suppose so. They must have been genuine Estimates and prudent finance. But how about this year's Estimates? Are they tightly drawn? If so, presumably we shall get similar Supplementary Estimates. If this year's Estimates are not tightly drawn, why are not they tightly drawn in a year such as this?
By their treatment of this problem, the Government show that they are not paying enough attention to the problem of reducing Government expenditure. We are often asked to give examples, but let me ask the Chancellor particularly about the continuing expenditure on the


nationalisation proposals of his colleagues, particularly the Minister of Transport. Surely, this expenditure must figure in the Chancellor's borrowing requirement. His requirement to borrow, to which he attaches so much significance, must be inflated by the sums which he has to find for the nationalising schemes of his colleagues. It seems to me to be complete madness, at a time when taxation is soaring at this rate, when the need to withhold Government expenditure is so clear, that the Government should persist with their nationalisation schemes to the utter detriment of the country's economy.
I come next to savings, because there is precious little in the Budget which will encourge savings. I agree that we do not encourage more savings simply by gimmicks or another one-half of 1 per Lent. or, the interest rate. I believe that a greater contractual element in saving is of immense importance, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has said, because the habit of savings, once acquired, persists.
The important thing is to encourage saving in all forms, not merely in Government securities, but in insurance policies, pension funds, investment trusts and in every way in which genuine savings can be achieved. This should be encouraged, yet there is precious little in the Budget to encourage saving and, indeed, a fair amount of discouragement. The trouble is that the Budget still leaves the impression with the people that the Labour Government are a Government who are hostile to capital—and capital is another name for someone else's savings.
I come next to the point of whether these proposals will work and whether they are adequate to deal with the problem. In calculating the balance of payments, one can calculate the problem more easily in foreign exchange terms. The effect is that after devaluation we have to earn about 17 per cent. more in terms of sterling to get the same amount of foreign exchange as we were getting before. That is a formidable amount indeed, and yet the Financial Statement estimates the increase in exports at only something between 8 and 13 per cent. An increase of exports of between 8 and 13 per cent. will not get us back in foreign exchange terms to where we were before devaluation. Yet at the same

time the same White Paper does not expect any reduction in the level of imports. I do not, on this basis see a very easy prospect for an early and substantial balance of payments surplus.
The truth is that devaluation has been heavily oversold. The Government never really intended to depend solely or even mainly on this devaluation of 14 per cent. They intended really to rely on the old-fashioned methods of strict deflation. The Chancellor said that he did not want to dig a hole and leave it empty till some while later he had to fill it in. I believe that that is precisely what he is doing. He is digging a very deep hole in the economy. It will not be filled quickly by the export-led boom he hopes to see.
But what I believe is most depressing about this Budget is that it does nothing at all to solve our long-term problems. The basic problem of the British economy is lack of drive and lack of resilience. This, surely, is why we do not grow as fast as our competitors and why it takes us longer than other countries, like Italy, for example, to recover from a short-term crisis. There are some factors we cannot change—for example, the advantage of scale in the United States, and manpower resources in agriculture in France and Germany, but we are far from making the best of what we have, particularly in brain power.
We must recapture the spirit of enterprise and technical innovation which this country once had in such great measure. Our scientific basis is strong, our research effort is very great, but it does not come through as it should in commercial, industrial and economic terms. Too few of the new, basic processes of industry are developed in this country. Too few of the most sophisticated machine tools in factories are designed and developed in this country. The lead which we used to have in management and management techniques is lost to the business schools in the United States, and possibly even in Japan. The facilities for education are expanded, but industry does not make enough use of them and the young, as the Dainton Report showed, are often discouraged.
We need to create an atmosphere in which the search for new ideas and innovation is constant and restless, and


this means the sort of tax changes which give incentives which this Budget does not give in any shape or form. It means more encouragement by the Government for training and retraining, especially in management. Progress is being made but more progress is needed. We need a positive incomes policy designed to encourage the development and use of the skills this country was once famous for. We need a positive attempt to sweep aside restrictions to productivity deals which, as I said earlier, are gravely jeopardised by the Government's present proposals, and not only by the incomes policy. Above all, we need at atmosphere in which success is respected and rewarded because it is striven for and earned. None of these things appear in the Budget.
There are many things, as I said, to be argued out still about this Budget—the problem of the three days' waiting, the problem of the family allowances—will they really work?—the policy about the Married Women's Property Act which is certainly retrospective, affecting a well-known piece of protection for families, well known over many years now; the aggregation of children's incomes with their parents, there will be many anomalies to be considered in investment income, the position under trusts, the position of small private companies.
There are many difficulties to be argued about. There is the Chancellor's extraordinary view of bonus shares and a return to the doctrine of the late Dr. Dalton. I once heard him say in this House that companies should spend then money on re-equipment instead of chucking it around in bonus shares—and people actually believed he knew what he was talking about. I am sorry to find the present Chancellor returning to the same view so far as the general issue of bonus shares is concerned.
To sum up, I said that we will vote tonight outright against the Budget, not because we believe that a large reduction in purchasing power is not needed—we have argued that it is needed—but because we differ in many ways from the Chancellor in his proposals. In particular, we say that there should be more economies in Government expenditure. I gave the figures earlier to demonstrate

how Government expenditure has got out of control. It is clear that the increased taxation involved in this Budget is roughly equivalent to the increase in Government expenditure expected in the same year.
We condemn the Budget because it makes no provision which is of any use to encourage savings. We condemn the Chancellor's proposal because his ideas on incomes policy are incomprehensible and wholly ineffective. Above all, we reassert that the grim necessity which he is facing and which is the excuse for his Budget has arisen because the policies of Her Majesty's Government have led to the complete collapse at home and abroad of confidence in their ability to govern.
I suppose that it could be said that the Chancellor of the Exchequer has inherited the problem, and I agree that the main blame rests on the Prime Minister. He is always with us. I think that we can say that he is like Midas in reverse: all that he touches turns to dross. I agree that the Chancellor of the Exchequer has shown courage in this Budget, but it is the courage of despair and pretty soon, I suspect, of defeat.

9.26 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins): During our four-day Budget debate, we have had 27 speeches from the benches opposite and an almost exactly equal number from the Government side of the House. Except for a few which, unfortunately, I missed today, I have carefully read all those which I did not hear. Some, either because they were peculiarly constructive or peculiarly unconstructive, I both heard and read.
Three main lines of criticism stand out from the Opposition speeches. First, there has been the attack on our prices and incomes policy, echoed by some of my hon. Friends. Second, there has been the line that public expenditure is the root of all evil and that I should have dealt with the whole problem by making cuts here. Third, there has been the criticism of the Budget as such that I should have depended more upon savings, that I have done nothing for incentives because I have not cut direct taxation, and that I have been too hard on the motorist. All these lines were faithfully echoed by the right hon. Member for Barnet (Mr. Maudling) in his


perfectly agreeable but slightly platitudinous speech this evening.
In addition, there have been a number of detailed points. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) asked me a number of them this afternoon. I can tell him straight away that some at least of his fears are misplaced, but they will all be dealt with in the Finance Bill, as the right hon. Gentleman indicated.
However, there is one general point which the right hon. Member for Enfield, West (Mr. I ain Macleod) put on Wednesday and put again this afternoon and to which he is entitled to an answer. He asked me about the level of unemployment. Even after the Budget, I expect it to be a falling level, but exactly by how much it falls must depend on how well we do with exports.
I shall endeavour to deal with each of the three main criticisms in turn and, first, with prices and incomes policy. I agree that the House is entitled to a good deal more detail on it. However, winding up speeches at 9.30 in the evening are not a good vehicle for detail, and we shall provide it in a White Paper which will be published in the course of a few days.
In the meantime, I reiterate my view that a firm prices and incomes policy is an essential supplement to the Budget. If we were to allow wage increases to go ahead far faster than productivity, we would partly undermine the demand management effect of the Budget, but still more damaging and important would be the effect on our costs. We would simply fritter away the competitive advantages of devaluation. All the evidence, unfortunately, is that, without a firmer policy, this would be only too likely to happen. We simply cannot afford another year like last, with a substantial increase in real wages accompanied by a balance of payments deficit.
I have tried hard, but so far unsuccessfully, to disentangle the attitude of the Opposition on this. The most detailed, and in many ways, the clearest speech came from the right hon. Member for Mitcham (Mr. R. Carr), but even he left several large holes in the middle of the Opposition's case. I take it that at least half of them want an effective incomes policy. Certainly the right hon. Member for Barnet half indicated that this even-

ing, and when he occupied my position and was presenting Budgets he laid very great stress upon it.
But the Opposition claim that they would do so without statutory powers. In present circumstances, how? As the right hon. Member for Barnet told us, the right hon. Member for Bexley (Mr. Heath) is not here this evening. He sent me a note at 6.30 saying that this was so. This is a fairly surprising occasion for the Leader of the Opposition, when a Budget has been announced two months in advance, not to be present for the winding up speech.

Mr. Maudling: If the right hon. Gentleman says that, he should also say that the Leader of the Opposition had a public engagement fixed more than five months ago.

Hon. Members: Where is he?

Mr. Speaker: Order. The Front Benches do not need any help from either side.

Hon. Members: Cheap. Withdraw.

Mr. Jenkins: It was not for me to begin to judge the relative importance—[Interruption.] The Leader of the Opposition had better mend his manners, and his Parliamentary Private Secretary, too.

Sir Robert Cary: rose—

Mr. Speaker: Order. The Chancellor of the Exchequer is not giving way. We might now get back to the Budget. Mr. Jenkins.

Mr. Jenkins: It is not—[Interruption.]—What I have every intention of saying, however long I have to wait for silence, is that when a Leader of the Opposition—[Interruption].

Mr. Speaker: Order. We must listen even to what we do not agree with.

Mr. Jenkins: What I am going to say is that the Leader of the Opposition—[HON. MEMBERS: "Oh."]—is perfectly entitled to make his own judgment as to whether he wishes to be here, but, in view of the tone of the speech—very different from the one we heard tonight—which he made last Tuesday afternoon, and in view of the tone of the speeches he has been making up and down the country, he must not expect that I should


not, because he is not here, make certain references and replies to what he has been saying.

Mr. Maudling: The Chancellor might tell the House that this was explained to him by the Leader of the Opposition also.

Mr. Jenkins: I am not sure what that intervention adds. The right hon. Gentleman the Leader of the Opposition attempted to list a number of ways—and in this he was supplemented by the right hon. Member for Mitcham—in which he thought they could make an incomes policy work. First, to quote the right hon. Member for Bexley, we are to use all the aspects of economic policy in a complete economic context—which I am bound to say is hardly a very precise concept—and that is to be achieved principally by a reduction in Government expenditure. I will come to that on its merits in a few minutes, but at this stage let me say that the only real impact of that on the wages situation would be if it produced a lower level of total demand. It would work only to the extent that it produced a looser labour market—in blunt terms, higher unemployment.
Secondly, the right hon. Gentleman wants to break what he calls the monopolistic power of certain trade unions which they use in free bargaining. That does not sound as though the trade unions will gain much out of his greater freedom. Indeed, it sounds as though they would be a good deal less free. Thirdly, he wants the Government to resist all non-productivity increases in the public sector. It is for the Government to stand up on this matter, he said, and to take the action which is necessary in their own sector. We all know what that means, particularly as most of the public sector is not subject to productivity agreements at all. It would mean a return to the gross unfairness of the partial freeze of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), with all the unfair and quite unjustified discrimination against public servants of all kinds. As a recipe for an effective voluntary policy, I find it difficult to imagine a less attractive method of approach.
There is one point which has been argued from both sides in our debates,

and of which I take full note. It is that over the last 10 years or so our wage increases have not been out of line with those of our main competitors. What has been wrong is that their productivity has increased faster. The main reason for this is that we have been forced to cut back by our frequent balance of payments deficit, and they have been able to go ahead more steadily. I want to see us break out of this. I have no desire to see this country develop into low wage—high cost economy, and I do not regard statutory restraint as a positive good in itself. But the time to break away from this is not with a mammoth balance of payments debt on our shoulders. This is the time, above all, when we must prevent our costs rising, and swing into a balance of payments surplus at the earliest possible moment. We must use this year and next to correct what has become a deep-seated structural weakness. Then, when we have got things right, we can, and should, take a somewhat more relaxed expansionist attitude.
I turn, next, to the public expenditure line of attack. This took its most extreme form in the speech of the hon. Member for Twickenham (Mr. Gresham Cooke), and it was to some extent echoed by the right hon. Member for Mitcham, and by the hon. Member for Wanstead and Woodford this afternoon. The hon. Member for Twickenham worked out some figures showing to his satisfaction that my extra £923 million in taxation was accounted for, in respect of all but £1 million, by increases in expenditure and that, therefore, I was merely paying the Government bills, and that to talk about demand management was nothing but eyewash. The hon. Member's arithmetic was ingenious but totally misleading. It ignored the vital fact that the expected buoyancy of the Revenue would in any event, without any tax changes, have produced an extra £775 million of revenue. Only a small part of the additional taxation will, therefore, be taken up by additional Government spending. By far the greater part will go to reduce the Government's borrowing requirement.
The hon. Member failed to dispose of the fact that the Budget has been a deliberate exercise in demand management, designed to secure a small but decisive shift from consumption and making room for an export-led expansion. As a result


of this shift we should for the first time for many years get all the demand cornponents—public expenditure, private consumption, investment and exports—approximately, into line with our more successful trading competitors abroad, and we intend to keep them there.
The size of the shift and its important effect upon our economy is marked by the dramatic decline in our net borrowing requirement. Last Tuesday the right hon. Member for Bexley tried to belittle the importance of this change. I do not know whether or not he was intending to make a major point, because he always speaks with the same unmodulated and undiscriminating tone, whether he is raising a major or a minor point. But if it was a major point, it was a singularly bad one. It seemed to be founded on a mixture of ignorance and spite.
It was based on ignorance because it suggested that I was leaving the borrowing of local authorities and the nationalised industries uncontrolled. These are among the principal outgoings of the National Loans Fund and are fully reflected in the net borrowing requirement. I am amazed that the right hon. Gentleman did not know that.
His point was based on spite because he went on to suggest that I had done all that I had only because I was a prisoner of the Letter of Intent. The Letter of Intent said that we would keep the net borrowing requirement to £1,000 million. We kept it to £364 million. By what possible theory of involuntarism does he explain away that discrepancy?
It is true that if Government expenditure were much lower taxation could be lower, too, but I do not find that most obvious and general proposition of great help unless I know exactly where it is proposed that the reduction should be made. It it were made on a big scale it would mean that we were deliberately choosing a lower level of public expenditure and a more niggardly provision of public services than most of our neighbours. Loth though hon. Members opposite are to recognise it, the plain fact is that as a percentage of the national income our public expenditure is not out of line with that of other advanced industrial countries.
In January we made some important cuts. It is fashionable now totally to

belittle them. I do not accept that. They comprised the vital decision to bring our world military commitments, at the earliest practicable moment and for the first time since the war, into line with those of the rich creditor nations of Europe. They included other harsh decisions on the domestic front. Of course they cut back on future planned spending, and did not produce an immediate or absolute reduction, but this has been equally true of any such exercise carried out by previous Governments from both sides and in every other country since the war. We have not had absolute cuts since 1931, and we certainly do not want or need any more of that approach.
What has been the attitude of the Opposition since then? While decrying the total, they have opposed the majority of the details and have thrown in a lot of additional expenditure plans of their own. They are to go back east of Suez at a cost of £250 million or £300 million a year. They have fought the economies on civil defence and T.A.V.R. III with relentless determination in both Houses. They are against other Home Office savings. They are against the postponing of the raising of the school leaving age. They want higher grants for students. The right hon. Member for Grantham (Mr. Godber) wanted more for the farmers.
The attitude of the Opposition to public expenditure is an organised, but not a very well organised, hypocrisy. What do they offer in exchange for this catalogue of extravagance, which is what it is?

Sir Knox Cunningham: A Prime Minister.

Mr. Jenkins: They have not got a Prime Minister to offer.
First, nearly everything is pushed into their favourite portmanteau solution of a cut in the number of civil servants. I certainly believe that there can and should be improvements in the efficiency of the Government machine and I read with close interest some constructive suggestions in this respect by the hon. Member for Guildford (Mr. David Howell) last week. But to suggest that improvements of this sort can begin to solve the whole problem, still more that they can do it overnight, is manifest nonsense. As I said in January, the record of right


hon. Gentlemen opposite is far from good in this respect.
What else do they offer? The right hon. Member for Enfield, West wants us to replace the system of agricultural subsidies with one of agricultural levies. That, at least, was something hard. It would have offered a saving of £250 million to the Consolidated Fund, but it would not have cancelled out their plans for further military extravagance. I would not regard the present system as necessarily sacrosanct, but the right hon. Gentleman's scheme would put the whole cost immediately on to the consumer and would raise the cost of living by about 11 per cent., a direct increase, as a method of taxation change, of about the same order as that resulting from the whole of my indirect tax changes, yielding £600 million—and doing it, too, in an extremely regressive way.
I find little else in any of the proposals which even begins to be hard. When this is combined with the Opposition's rash taxation commitments, completely to abolish S.E.T., to make substantial cuts in Income Tax and Surtax, and now, thrown in this afternoon by the hon. Member for Wanstead and Woodford, whether speaking with authority or not, I do not know, the non-aggression of husbands' and wives' incomes, which could cost up to £300 million a year—when all these matters are put together, the result becomes a monument to financial irresponsibility, and one which, I believe, only the ill-considered incontinence of the Leader of the Opposition's ambition would allow him to put forward.
This brings me to the third main line of criticism, the details of the Budget proposals themselves. First, there is the no-incentive argument, much stressed by the right hon. Member for Barnet. The contribution of this Budget to incentives is to make this big shift in demand without any increase at all in the rates of tax on earned income. That is something which is not contemplated in the United States if and when they get their tax increase. [HON. MEMBERS: "Lower taxes."] The rates of direct taxation in the United States in the middle range—[HON. MEMBERS: "Ah."]—apparently hon. Members opposite are interested only in the rates of tax at their highest levels. In the middle ranges, those affecting people in the management groups, scien-

tists and technologists, those about whom we hear so much, the rates in the United States are not significantly lower than ours. No further reduction, as the right hon. Gentleman knows quite well, could have been contemplated in these rates this year without the complete fiscal irresponsibility which I have just mentioned.
Next, there is the view that I ought to have depended more on savings, a view put forward by the right hon. Members for Enfield, West, Bexley and Barnet and a number of other hon. Members. Once again, I thought that the right hon. Member for Enfield, West was more sensible and constructive than the earlier speeches from the Opposition Front Bench. He did not endeavour to dismiss without argument the difficulties about compulsory savings or special inducements which I put before the House, having considered them very carefully, in my Budget speech. He asked me to look carefully at his Save-As-You-Earn scheme. I gladly give him the assurance that I will look carefully at it. It has some attractive features, and I am anxious to improve our savings performance by any reasonable means at my disposal.
But there is a world of difference between that and the view which some hon. Members opposite appear to hold that I ought to have depended heavily on savings rather than on taxation. That would have been an easy and therefore a dangerous way out. The course of savings can never be predicted with accuracy. That is particularly so when a cut-back in the standard of living is necessary. What I am being asked to do is to say that because I hope that something, which is not within my control, will happen, therefore I will count on it happening. That would not measure up to the needs of the situation, and I am not prepared to do it.
Next, there is the view that I am particularly and unreasonably harsh on the motor industry and the motoring public. If that were so, it would be a peculiarly perverse action on my part, representing, as I have done for 18 years, and as I hope to do for quite a number of years more, a motor industry constituency. But in any event it is not so. The burdens which I have placed on the industry are, I believe, compatible with


its continued prosperity, provided that it devotes the most determined efforts to exploiting its now great export opportunities. I was interested to notice that my hon. Friend the Member for Luton (Mr. Howie), with his close constituency knowledge of the industry, bore me out in his closely argued speech last Thursday.

Mr. Maudling: He was a Whip.

Mr. Jenkins: That makes his judgment the mo-e independent. Nor is there anything at all in the view, sedulously cultivated by hon. Members opposite, that the Government are anti-motorist.

Sir C. Osborne: rose—

Mr. Jenkins: I will not give way. In the three years from September, 1964, the number of private cars on the road has increased by 2 million or 25 per cent., a very rapid rate of increase indeed.

Sir C. Osborne: rose—

Mr. Jenkins: I will not give way. The right hon. Member for Barnet did not give way at five minutes past nine o'clock. Why should the right hon. Member expect me to give way at five minutes to ten o'clock?
I therefore reject all the main lines of criticism which have been developed by hon. Members opposite. I am bound to point out that they have been rejected at least equally firmly by nearly every independent commentator outside the House.
Tuesday's shrill attack by the right hon. Member for Bexley has aroused hardly a single echo from outside. [Interruption.] I am not claiming that it is a universally popular Budget. It could not be in the circumstances. But it has faced up to the needs of the situation, and that is a good deal more than can be said for the response of the Opposition. The weekend before last, in the midst of the gold crisis, we had the spectacle of the Leader of the Opposition and the Deputy Leader of the Opposition defining their—[Interruption.]—attitudes

of the Government of this country at a time of grave international difficulty. I would describe it as an extraordinary spectacle were it not fully symptomatic of an underlying difference. [Interruption.]

Mr. Speaker: Order. Mr. Jenkins.

Mr. Jenkins: The Deputy Leader of the Opposition—[An HON. MEMBER: "What about George?"]—and at least we have the Deputy Leader of the Opposition in his place—said that if the Government took the measures needed he would support them at the price of an early General Election. In other words, he was prepared, on conditions, to put the national interest first. This was far too much for the Leader of the Opposition. In the words of the The Times
Mr. Heath's annoyance with Mr. Maudling may be taken for granted.
In other words, the Leader of the Opposition made it clear in his speech that there were no conditions on which he was prepared to put the national interest first. [Interruption.]
At moments of great stress this country has normally been lucky in Leaders of the Opposition. They have mostly been prepared to rise to big occasions, but that is not the case today. Not since the early days of Bonar Law's leadership have we seen a lack of self confidence and petty partisanship as uniquely and constantly blended as in the Leader of the Opposition. [Interruption.] But we will go on—

Several Hon. Members: rose—

Hon. Members: Sit down.

Mr. Jenkins: But we will go on without his support, whether conditional or unconditional. The country will find the Budget hard, but I think that it will accept its message and purpose and, having accepted it, the economy can advance with the confidence it has not known for a long time past.

Question put:—

The House divided: Ayes 332, Noes 248.

Division No. 99.]
AYES
[10.0 p.m.


Abse, Leo
Archer, Peter
Bagier, Cordon A. T.


Albu, Austen
Armstrong, Ernest
Barnes, Michael


Allaun, Frank (Salford, E.)
Atkins, Ronald (Preston, N.)
Barnett, Joel


Alldritt, Walter
Atkinson, Norman (Tottenham)
Baxter, William


Allen, Scholefield
Bacon, Rt. Hn. Alice
Beaney, Alan




Bellenger, Rt. Hn. F. J.
Forrester, John
MacColl, James


Bence, Cyril
Fowler, Gerry
MacDermot, Niall


Benn, Rt. Hn. Anthony Wedgwood
Fraser, John (Norwood)
Macdonald, A. H.


Bennett, James (C'gow, Bridgeton)
Freeson, Reginald
McGuire, Michael


Bidwell, Sydney
Galpern, Sir Myer
McKay, Mrs. Margaret


Binns, John
Gardner, Tony
Mackenzie, Gregor (Rutherglen)


Bishop, E. S.
Garrett, W. E.
Mackie, John


Blackburn, F.
Ginsburg, David
Mackintosh, John P.


Blenkinsop, Arthur
Gordon Walker, Rt. Hn. P. C.
Maclennan, Robert


Boardman, H. (Leigh)
Gourlay, Harry
McNamara, J. Kevin


Booth, Albert
Gray, Dr. Hugh (Yarmouth)
MacPherson, Malcolm


Boston, Terence
Greenwood, Rt. Hn. Anthony
Mahon, Peter (Preston, S.)


Bottomley, Rt. Hn. Arthur
Gregory, Arnold
Mahon, Simon (Bootle)


Boyden, James
Griffiths, David (Rother Valley)
Mallalieu, E. L. (Brigg)


Braddock, Mrs. E. M.
Griffiths, Rt. Hn. James (Llanelly)
Mallalieu, J. P. W.(Huddersfield, E.)


Bradley, Tom
Griffiths, Will (Exchange)
Manuel, Archie


Bray, Dr. Jeremy
Gunter, Rt. Hn. R. J.
Mapp, Charles


Brooks, Edwin
Hamilton, James (Bothwell)
Marks, Kenneth


Broughton, Dr. A. D. D.
Hamilton, William (Fife, W.)
Marquand, David


Brown, Rt. Hn. George (Belper)
Hamling, William
Marsh, Rt. Hn. Richard


Brown, Hugh D. (G'gow, Provan)
Hannan, William
Mason, Rt. Hn. Roy


Brown, Bob (N'c'tle-upon-Tyne, W.)
Harper, Joseph
Maxwell, Robert


Buchan, Norman
Harrison, Walter (Wakefield)
Mayhew, Christopher


Buchanan, Richard (G'gow, Sp'burn)
Haseldine, Norman
Mellish. Rt. Hn. Robert


Butler, Herbert (Hackney, C.)
Hattersley, Roy
Mendelson, J. J.


Butler, Mrs. Joyce (Wood Green)
Hazell, Bert
Mikardo, Ian


Callaghan, Rt. Hn. James
Healey, Rt. Hn. Denis
Millan, Bruce


Cant, R. B.
Heffer, Eric S.
Miller, Dr. M. S.


Carmichael, Neil
Henig, Stanley
Milne, Edward (Blyth)


Carter-Jones, Lewis
Herbison, Rt. Hn. Margaret
Mitchell, R. C. (S'th'pton, Test)


Castle, Rt. Hn. Barbara
Hilton, W. S.
Molloy, William


Coe, Denis
Hobden, Dennis (Brighton, K'town)
Moonman, Eric


Coleman, Donald
Hooley, Frank
Morgan, Elystan (Cardiganshire)


Concannon, J. D.
Horner, John
Morris, Alfred (Wythenshawe)


Conlan, Bernard
Houghton, Rt. Hn. Douglas
Morris, Charles R. (Openshaw)


Corbet, Mrs. Freda
Howarth, Harry (Wellingborough)
Morris, John (Aberavon)


Craddock, George (Bradford, S.)
Howarth, Robert (Bolton, E.)
Moyle, Roland


Crawshaw, Richard
Howell, Denis (Small Heath)
Mulley, Rt. Hn. Frederick


Cronin, John
Howie, W,
Murray, Albert


Crosland, Rt. Hn. Anthony
Hoy, James
Neal, Harold


Crossman, Rt. Hn. Richard
Huckfield, Leslie
Newens, Stan


Cullen, Mrs. Alice
Hughes, Rt. Hn. Cledwyn (Anglesey)
Noel-Baker, Rt. Hn. Philip (Derby, S.)


Dalyell, Tam
Hughes, Emrys (Ayrshire, S.)
Norwood, Christopher


Darling, Rt. Hn. George
Hughes, Hector (Aberdeen, N.)
Oakes, Gordon


Davidson, Arthur (Accrington)
Hughes, Roy (Newport)
Ogden, Eric


Davies, Dr. Ernest (Stretford)
Hunter, Adam
Oram, Albert E.


Davies, G. Elfed (Rhondda, E.)
Hynd, John
Orbach, Maurice


Davies, Ednyfed Hudson (Conway)
Irvine, Sir Arthur
Orme, Stanley


Davies, Ifor (Gower)
Jackson, Colin (B'h'se &amp; Spenb'gh)
Oswald, Thomas


de Freitas, Rt, Hn. Sir Geoffrey
Jackson, Peter M. (High Peak)
Owen, Dr. David (Plymouth, S'tn)


Delargy, Hugh
Janner, Sir Barnett
Owen, Will (Morpeth)


Dell, Edmund
Jay, Rt. Hn. Douglas
Padley, Walter


Dempsey, James
Jeger, George (Goole)
Page, Derek (King's Lynn)


Dewar, Donald
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Paget, R. T.


Diamond, Rt. Hn. John
Jenkins, Hugh (Putney)
Palmer, Arthur


Dickens, James
Jenkins, Rt. Hn. Roy (Stechford)
Pannell, Rt. Hn. Charles


Dobson, Ray
Johnson, Carol (Lewisham, S.)
Park, Trevor


Doig, Peter
Johnson, James (K'ston-on-Hull W.)
Parker, John (Dagenham)


Driberg, Tom
Jones, Dan (Burnley)
Parkin, Ben (Paddington, N.)


Dunn, James A.
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Parkyn, Brian (Bedford)


Dunnett, Jack
Jones, J. Idwal (Wrexham)
Pavitt, Laurence


Dunwoody, Mrs. Gwyneth (Exeter)
Jones, T. Alec (Rhondda, West)
Pearson, Arthur (Pontypridd)


Dunwoody, Dr. John (F'th &amp; C'b'e)
Judd, Frank
Peart, Rt. Hn. Fred


Eadie, Alex
Kelley, Richard
Pentland, Norman


Edelman, Maurice
Kenyon, Clifford
Perry, Ernest G. (Battersea, S.)


Edwards, Rt. Hn. Ness (Caerphilly)
Kerr, Dr. David (W'worth, Central)
Perry, George H. (Nottingham, S.)


Edwards, Robert (Bilston)
Kerr, Russell (Feltham)
Prentice, Rt. Hn. R. E.


Edwards, William (Merioneth)
Lawson, George
Price, Christopher (Perry Barr)


Ellis, John
Leadbitter, Ted
Price, Thomas (Westhoughton)


English, Michael
Ledger, Ron Lee, Rt. Hn. Frederick (Newton)
Price, William (Rugby)


Ennals, David
Lee, Rt. Hn. Jennie (Cannock)
Probert, Arthur


Ensor, David
Lee, John (Reading)
Pursey, Cmdr. Harry


Evans, Albert (Islington, S.W.)
Lever, Harold (Cheetham)
Randall, Harry


Evans, Ioan L. (Birm'h'm, Yardley)
Lewis, Arthur (W. Ham, N.)
Rankin, John


Faulds, Andrew
Lewis, Ron (Carlisle)
Rees, Merlyn


Fernyhough, E.
Lipton, Marcus
Reynolds, G. W.


Finch, Harold
Lomas, Kenneth
Rhodes, Geoffrey


Fitch, Alan (Wigan)
Loughlin, Charles
Roberts, Albert (Normanton)


Fletcher, Raymond (Ilkeston)
Luard, Evan
Roberts, Goronwy (Caernarvon)


Fletcher, Ted (Darlington)
Lyon, Alexander W. (York)
Roberts, Gwilym (Bedfordshire, S.)


Foley, Maurice
Lyons, Edward (Bradford, E.)
Robertson, John (Paisley)


Foot, Rt. Hn. Sir Dingle (Ipswich)
Mabon, Dr. J. Dickson
Robinson, Rt. Hn. Kenneth (St. P'c'as)


Foot, Michael (Ebbw Vale)
McBride, Neil
Robinson, W. O. J. (Walth'stow, E.)


Ford, Ben
McCann, John
Rodgers, William (Stockton)




Roebuck, Roy




Rogers, George (Kensington, N.)
Strauss, Rt. Hn. G. R.
Wells, William (Walsall, N.)


Rose, Paul
Summerskill, Hn. Dr. Shirley
Whitaker, Ben


Ross, Rt. Hn. William
Swain, Thomas
White, Mrs. Eirene


Rowlands, E. (Cardiff, N.)
Swingler, Stephen
Whitlock, William


Ryan, John
Symonds, J. B.
Wilkins, W. A.


Shaw, Arnold (Ilford, S.)
Taverne, Dick
Willey, Rt. Hn. Frederick


Sheldon, Robert
Thomas, George (Cardiff, W.)
Williams, Alan (Swansea, W.)


Shinwell, Rt. Hn. E.
Thomson, Rt. Hn. George
Williams, Alan Lee (Hornchurch)


Shore, Rt Hn. Peter (Stepney)
Thornton, Ernest
Williams, Clifford (Abertillery)


Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Tinn, James
Williams, Mrs. Shirley (Hitchin)


Short, Mrs. Renée (W'hampton, N. E.)
Tomney, Frank
Williams, W. T. (Warrington)


Silkin, Rt Hn. John (Deptford)
Tuck, Raphael
Willis, Rt. Hn. George


Silkin, Hn. S. C. (Dulwich)
Urwin, T. W.
Wilson, Rt. Hn. Harold (Huyton)


Silverman, Julius (Aston)
Varley, Eric G.
Wilson, William (Coventry, S.)


Skeffington, Arthur
Wainwright, Edwin (Dearne Valley)
Winnick, David


Slater, Joseph
Walden, Brian (All Saints)
Woodburn, Rt. Hn. A.


Small, William
Walker, Harold (Doncaster)
Woof, Robert


Snow, Julian
Wallace, George
Wyatt, Woodrow


Spriggs, Leslie
Watkins, David (Consett)
Yates, Victor


Steele, Thomas (Dunbartonshire, W.)
Watkins, Tudor (Brecon &amp; Radnor)
TELLERS FOR THE AYES:


Stewart, Rt. Hn. Michael
Weitzman, David
Mr. Brian O'Malley and


Stonehouse, John
Wellbeloved, James
Mr. Charles Grey.




NOES


Alison, Michael (Barkston Ash)
Doughty, Charles
Iremonger, T. L.


Allason, James (Hemel Hempstead)
Douglas-Home, Rt. Hn. Sir Alec
Irvine, Bryant Godman (Rye)


Astor, John
Drayson, C. B.
Jenkin, Patrick (Woodford)


Atkins, Humphrey (M't'n &amp; M'd'n)
du Cann, Rt. Hn. Edward
Jennings, J. C. (Burton)


Awdry, Daniel
Eden, Sir John
Johnson Smith, G. (E. Grinstead)


Baker, W. H. K.
Elliot, Capt, Walter (Carshalton)
Johnston, Russell (Inverness)


Batsford, Brian
Errmgton, Sir Eric
Jones, Arthur (Northants, S.)


Beamish, Col. Sir Tufton
Ewing, Mrs. Winifred
Jopling, Michael


Bell, Ronald
Eyre, Reginald
Joseph, Rt. Hn. Sir Keith


Bennett, Sir Frederic (Torquay)
Farr, John
Kaberry, Sir Donald


Bennett, Dr. Reginald (Cos. &amp; Fhm)
Fisher, Nigel
Kerby, Capt. Henry


Berry, Hn. Anthony
Fletcher-Cooke, Charles
Kershaw, Anthony


Bessell, Peter
Fortescue, Tim
Kimball, Marcus


Biffen, John
Foster, Sir John
King, Evelyn (Dorset, S.)


Biggs-Davison, John
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Kirk, Peter


Birch, Rt. Hn. Nigel
Galbraith, Hn. T. G.
Kitson, Timothy


Black, Sir Cyril
Gibson-Watt, David
Knight, Mrs. Jill


Blaker, Peter
Giles, Rear-Adm. Morgan
Lambton, Viscount


Boardman, Tom
Gilmour, Ian (Norfolk, C.)
Lancaster, Col. C. G.


Body, Richard
Gilmour, Sir John (Fife, E.)
Lane, David


Bossom, Sir Clive
Glyn, Sir Richard
Langford-Holt Sir John


Boyd-Carpenter, Rt. Hn. John
Codber, Rt. Hn. J. B.
Legge-Bourke, Sir Harry


Boyle, Rt. Hn. Sir Edward
Goodhart, Philip
Lewis, Kenneth (Rutland)


Braine, Bernard
Goodhew, Victor
Lloyd, Rt. Hn. Geoffrey (Sut 'nC' dfield)


Brewis, John
Gower, Raymond
Lloyd, Ian (P'tsm'th, Langstone)


Brinton, Sir Tatton
Grant, Anthony
Lloyd, Rt. Hn. Selwyn (Wirral)


Bromley-Davenport, Lt.-Col.SirWalter
Grant-Ferris, R.
Longden, Gilbert


Brown, Sir Edward (Bath)
Gresham Cooke, R.
Loveys, W. H.


Bruce-Gardyne, J.
Grieve, Percy
Lubbock, Eric


Bryan, Paul
Griffiths, Eldon (Bury St. Edmunds)
McAdden, Sir Stephen


Buchanan-Smith, Alick (Angus, N &amp; M)
Gurden, Harold
MacArthur, Ian


Buck, Antony (Colchester)
Hall, John (Wycombe)
Maclean, Sir Fitzroy


Bullus, Sir Eric
Hall-Davis, A. G. F.
Macleod, Rt. Hn. Iain


Burden, F. A.
Hamilton, Lord (Fermanagh)
McMaster, Stanley


Campbell, Gordon
Hamilton, Michael (Salisbury)
Macmillan, Maurice (Farnham)


Carlisle, Mark
Harris, Frederic (Croydon, N.W.)
Maddan, Martin


Cary, Sir Robert
Harrison, Brian (Maldon)
Maginnis, John E.


Channon, H. P. G.
Harrison, Col. Sir Harwood (Eye)
Marples, Rt. Hn. Ernest


Chichester-Clark, R.
Harvey, Sir Arthur Vere
Marten, Neil


Clark, Henry
Harvie Anderson, Miss
Maudling, Rt. Hn. Reginald


Cooke, Robert
Hastings, Stephen
Mawby, Ray


Cooper-Key, Sir Neill
Hawkins, Paul
Maxwell-Hyslop, R. J.


Cordle, John
Hay, John
Maydon, Lt.-Cmdr. S. L. C.


Corfield, F. V.
Heald, Rt. Hn. Sir Lionel
Mills, Peter (Torrington)


Costain, A. P.
Heath, Rt. Hn. Edward
Mills, Stratton (Belfast, N.)


Craddock, Sir Beresford (Spelthorne)
Heseltine, Michael
Miscampbell, Norman


Crosthwaite-Eyre, Sir Oliver
Higgins, Terence L.
Mitchell, David (Basingstoke)


Crouch, David
Hiley, Joseph
Monro, Hector


Crowder, F. P.
Hill, J. E. B.
Montgomery, Fergus


Cunningham, Sir Knox
Hirst, Geoffrey
Morgan, Geraint (Denbigh)


Currie, G. B. H.
Hogg, Rt. Hn. Quintin
Morrison, Charles (Devizes)


Dalkeith, Earl of
Holland, Philip
Mott-Radclyffe, Sir Charles


Dance, James
Hooson, Emlyn
Munro-Lucas-Tooth, Sir Hugh


Davidson, James(Aberdeenshire, W.)
Hordern, Peter
Murton, Oscar


d'Avigdor-Goldsmid, Sir Henry
Hornby, Richard
Nabarro, Sir Gerald


Dean, Paul (Somerset, N.)
Howell, David (Guildford)
Neave, Airey


Deedes, Rt. Hn. W. F. (Ashford)
Hunt, John
Nicholls, Sir Harmar


Digby, Simon Wingfield
Hutchison, Michael Clark
Noble, Rt. Hn. Michael




Nott, John
Robson Brown, Sir William
Turton, Rt. Hn. R. H.


Onslow, Cranley
Rodgers, Sir John (Sevenoaks)
van Straubenzee, W. R.


Orr, Capt. L. P. S.
Rossi, Hugh (Hornsey)
Vaughan-Morgan, Rt. Hn. Sir John


Orr-Ewing, Sir Ian
Royle, Anthony
Vickers, Dame Joan


Osborn, John (Hallam)
Russell, Sir Ronald
Wainwright, Richard (Colne Valley)


Osborne, Sir Cyril (Louth)
Rhys Williams, Sir Brandon
Walker-Smith, Rt. Hn. Sir Derek


Page, Graham (Crosby)
St. John-Stevas, Norman
Wall, Patrick


Page, John (Harrow, W.)
Scott, Nicholas
Walters, Dennis


Pardoe, John
Scott-Hopkins, James
Ward, Dame Irene


Pearson, Sir Frank (Clitheroe)
Sharples, Richard
Weatherill, Bernard


Peel, John
Shaw, Michael (Sc'b'gh &amp; Whitby)
Webster, David


Percival, Ian
Silvester, Frederick
Wells, John (Maidstone)


Peyton, John
Sinclair, Sir George
Whitelaw, Rt. Hn. William


Pike, Miss Mervyn
Smith, John
Wills, Sir Gerald (Bridgwater)


Pink, B. Bonner
Stainton, Keith
Wilson, Geoffrey (Truro)


Pounder, Rafton
Steel, David (Roxburgh)
Wolrige-Gordon, Patrick


Powell, Rt. Hn. J. Enoch
Stodart, Anthony
Wood, Rt. Hn. Richard


Price, David (Eastleigh)
Stoddart-Scott, Col. Sir M. (Ripon)
Woodnutt, Mark


Prior, J. M. L.
Tapsell, Peter
Worsley, Marcus


Pym, Francis
Taylor, Edward M.(G'gow, Cathcart)
Wright, Esmond


Quennell, Miss J. M.
Taylor, Frank (Moss Side)
Wylie, N. R.


Ramsden, Rt. Hn. James
Teeling, Sir William
Younger, Hn. George


Renton, Rt. Hn. Sir David
Temple, John M.



Ridley, Hn. Nicholas
Thatcher, Mrs. Margaret
TELLERS FOR THE NOES:


Ridsdale, Julian
Thorpe, Rt. Hn. Jeremy
Mr. R. W. Elliott and


Rippon, Rt. Hn. Geoffrey
Tilney, John
Mr. Jasper More.

Resolved,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that, without prejudice to any authorisation by virtue of any Resolution relating to purchase tax or selective employment tax, this Resolution does not extend to the making of amendments of the enactments relating to either of those taxes so as to give relief from tax.

BUSINESS OF THE HOUSE

Ordered,
That the proceedings on Government Business may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[The Prime Minister.]

WAYS AND MEANS

Mr. Speaker: I am now required under Standing Order 90(2) to put successively

without further debate the Question on each of the remaining 34 Ways and Means Motions and the four Procedure Motions and on the Motion relating to Finance [Money], on all of which the Finance Bill is to be brought in.
I understand that at the corresponding stage last year the Chairman obtained the leave of the Committee of Ways and Means to the putting of each Question in a shortened form rather than reading out each Motion in extenso. I propose, if I have the leave of the House, to adopt similar procedure, that is to say, first to state the title of the Motion and then simply to put the Question, "That the Motion be agreed to." It is, of course, in order for the House to divide on any of these Motions.

SPIRITS (EXCISE AND CUSTOMS)

Motion made, and Question,

That, as from 20th March 1968, the duties of excise chargeable under section 1 of the Finance Act 1964 on spirits, and the duties of customs chargeable under that section on spirits ether than perfumed spirits, shall respect-

TABLE: SPIRITS OTHER THAN IMPORTED PERFUMED SPIRITS (RATES OF CUSTOMS AND EXCISE DUTIES)



Customs rates


Description of Spirits
Excise rate
Full
Common-wealth
Convention



£
s.
d.
£
s.
d.
£
s.
d.
£
s.
d.


1. British spirits (per proof gallon)
17
2
9

—


—


—



2. Imported spirits other than perfumed spirits—














(a) not comprised below in this paragraph (per proof gallon)

—

17
5
3
17
2
9
17
2
9


(b) liqueurs, cordials, mixtures and other preparations in bottle, entered in such manner as to indicate that the strength is not to be tested (per gallon)

—

23
6
0
23
2
6
23
2
6

In the Table above "Commonwealth" indicates goods qualifying for Commonwealth preference under section 2 of the Import Duties Act 1958, "Convention" indicates goods of Convention area origin within the meaning of the European Free Trade Association Act 1960 and "Full" indicates other goods.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means Motions), and agreed to.

WINE (CUSTOMS)

Motion made, and Question,
That the duties of customs chargeable under section 3 of the Finance Act 1964 on wine, including the lees of wine—
(a) shall, as from 20th March, 1968, be at the rates shown in the following Table instead of the rates shown in Schedule 3 to that Act as substituted by section 1(2) of the Finance Act 1967 and shall, in the case of light wine which qualifies for Commonwealth preference, be subject to section 3(3) of the said Act of 1964 as in the case of those rates shown in the said Schedule 3;
(b) shall, as from 1st July 1968, in the case of wine of the Republic of Ireland consigned to the United Kingdom from that country—
(i) being wine of any description not exceeding 32 degrees of proof spirit, be at a rate equal to the rate at which excise duty is for the time being chargeable on British wine of that description;
(ii) being still wine in bottle which exceeds 32 degrees of proof spirit, be at a rate equal to that at which the duty of customs is for the time being chargeable on such wine not in bottle.

tively be at the rates shown in the following Table instead of the rates shown in Table 1 of Schedule 1 to that Act as substituted by section 1(2) of the Finance Act 1967.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968:

each of the above rates of duty being, in the case of spirits not warehoused or warehoused for less than 3 years, increased by 1s. 6d. per proof gallon or, for spirits within paragraph 2(b) of this table, by 2s. 0d. per gallon.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

TABLE: WINE (RATES OF CUSTOMS DUTIES)



Rates of duty (per gallon)


Description of wine
Full
Common-wealth



£
s.
d.
£
s.
d.


Light wine:—








Still—


not in bottle
1
3
3
1
1
3


in bottle
1
5
9
1
2
9


Sparkling
1
15
9
1
13
9


Other wine:—








Still—








not in bottle
2
5
3
1
15
3


in bottle 
2
7
9
1
16
9


Sparkling
2
17
9
2
7
9


together, in the case of wine exceeding 42 degrees proof spirit, with an addition for;ach additional degree or fraction of a degree of

3
9

2
11

In the Table above "Commonwealth" indicates goods qualifying for Commonwealth preference under section 2 of the Import Duties Act 1958 and "Full" indicates other goods; and "light wine" means wine not exceeding 25 degrees or, in the case of wine qualifying for Commonwealth preference, 27 degrees of proof spirit.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

BRITISH WINE (EXCISE)

Motion made, and Question,

That, as from 20th March 1968, the duties of excise chargeable under section 3 of the Finance Act 1964 on British wine shall be at the rates shown in the following Table instead of the rates shown in Schedule 4 to that Act as substituted by section 1(2) of the Finance Act 1967.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

TABLE: BRITISH WINE (RATES OF EXCISE DUTIES)


Description of British Wine
Rates of duty (per gallon)



£
s.
d.


Light British wine:—





Still
1
0
9


Sparkling
1
6
9


Other British wine:—





Still
1
5
9


Sparkling
1
11
9


In the Table above, "light British wine" means British wine not exceeding 27 degrees of proof spirit.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

TOBACCO (CUSTOMS AND EXCISE)

Motion made, and Question,

That—
(a) as from 20th March 1968 the duties of customs and excise chargeable on tobacco under section 4 of the Finance Act 1964 shall be at rates increased by adding 4s. 4d. per pound to each of the existing rates, that is, those set out in Tables 1 and 2 in Schedule 5 to that Act as amended by section 1(2) of the Finance Act 1965;
(b) as respects tobacco on which there have been paid duties of customs or excise at the said increased rates, drawback shall be allowed in accordance with the said section 4 at rates increased by adding the like amount to the rates set out in Table 3 in that Schedule as amended by the said section 1(2);
(c) as from 1st July 1968 any rate at which the duties of customs are chargeable under the said section 4 on tobacco of the Republic of Ireland consigned to the United Kingdom from that country shall, if apart from this Resolution it would be higher, be the same as the corresponding rate applicable to tobacco of Convention area origin within the meaning of the European Free Trade Association Act 1960.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provi

sions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

HYDROCARBON OILS (CUSTOMS AND EXCISE)

Motion made, and Question,

That, as from six o'clock in the evening of 19th March 1968, the duty of customs on hydrocarbon oils and the duty of excise on hydrocarbon oils, on petrol substitutes and on spirits used for power methylated spirits, shall be increased by 4d. a gallon to 3s. 11 d. a gallon.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

MATCHES (CUSTOMS)

Motion made, and Question,

That, as from 1st July 1968, the duties of customs chargeable on matches under section 4 of the Finance Act 1951 shall in the case of matches of the Republic of Ireland consigned to the United Kingdom from that country be at the same rates as the corresponding rates of excise duty chargeable under that section.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

MECHANICAL LIGHTERS (CUSTOMS)

Motion made, and Question,

That, as from 1st July 1968, the duties of customs chargeable on mechanical lighters under section 6 of the Finance Act 1928 shall in the case of mechanical lighters of the Republic of Ireland consigned to the United Kingdom from that country be at the same rates as the corresponding rates of excise duty chargeable under that section.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

HOPS, HOP OIL, ETC. (CUSTOMS)

Motion made, and Question,

That as from 1st July 1968 no duty of customs shall be chargeable under section 3 of the Finance Act 1957 on the importation into the United Kingdom of hops, hop oil, or any extract, essence or other similar preparation made from hops.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

EXCISE (GENERAL BETTING DUTY)

Motion made, and Question,

That the amount of the general betting duty in respect of any bet made on or after 25th March 1968 shall be equal to five per cent. of the amount on which the duty falls to be computed.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

EXCISE (POOL BETTING DUTY)

Motion made, and Question,

That the amount of the pool betting duty as respects bets made at any time by reference to any event taking place on or after 25th March 1968 shall be equal to thirty-three and a third per cent. of the amount on which the duty falls to be computed.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

EXCISE (GAMING LICENCE DUTY)

Motion made, and Question,

That the amount of the duty under section 13 of the Finance Act 1966 on a gaming licence in respect of any premises granted so as to expire on a date later than 30th September 1968 shall be determined as if for the Table set out in subsection (2) of that section there were substituted the following Table—

And it is hereby declared that it is expedient in the public interest that this Resolution should have-statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PURCHASE TAX

Motion made, and Question,

That, subject to any new order of the Treasury under section 2 of the Purchase Tax Act 1963, Part I of Schedule 1 to that Act (chargeable and exempt goods and rates of tax) as amended by section 1(4) of the Finance Act 1967 shall have effect as from 20th March 1968—
(a) with the substitution for any reference to 11% or 16½% of a reference to 12½% or, as the case may be, 20%
(b) except in the following places, namely, Groups 1, 2, 4, 8, 9, 16 and 17, paragraph (c) or Group 19, Groups 22, 24, and 25, paragraph (a) of Group 26, Group 29, paragraphs (a) and (b) of Group 30, and Groups 31 and 32, with the substitution for any reference to 27½% of a reference to 33⅓%;
(c) in the following places, namely, paragraph (b) of Group 1 (fur garments and fur headgear), paragraph (b) of Group 2 (articles made of fur skin), paragraphs (a) and (b) of


Group 4 (jewellery and articles of personal adornment), paragraph (a) of Group 8 (dressed fur skin), paragraph (b)(i) of Group 9 (rugs made of fur skin), paragraph (b) of Group 16 (garden ornaments), paragraph (c) of Group 19 (gramophone records), Group 22 (smokers' requisites), Group 25 (pictures, prints, etc.), paragraph (a) of Group 26 (diaries, calendars and greeting cards), Group 29 (fancy or ornamental articles suitable for personal or domestic use), and paragraphs (a) and (b) of Group 30 (certain hairdressing equipment), with the substitution for any reference to 27½% of a reference to 50½
(d) in Group 14, with the omission of paragraph (2) of the exemptions;
(e) in Group 17 (clocks, watches, etc.) with the substitution for the words "Articles not comprised below in this Group…27½%" of the words:—

"(a) Articles not comprised below in this Group
33⅓%


(b) Articles not comprised below in this Group which are made wholly or partly of gold, silver or other precious metal (not including base metal which is coated or plated with precious metal)."
50%

(f) with the insertion after Group 19 of the following:—

"GROUP 19A


(a) Instruments, whether or not complete, which are, or if complete would be, suitable for the reproduction of sound recorded on magnetic tapes or on other recording material, whether or not those instruments are, or if complete would be, suitable also for so recording sound, and parts thereof and accessories thereto.
33⅓%


(b) Sound records on magnetic tape or on other recording material, other than records of a kind not produced in quantity for general sale.
50%


(c) Containers (not comprised in any other Group) for records falling within paragraph (b) above.
50%

Not chargeable under this Group

1. Tape recorders and reproducers suitable only for scientific or industrial use, and parts and accessories suitable only for use therewith.

2. Instruments suitable only as office appliances for the recording or reproduction of speech, and parts and accessories suitable only for use therewith.

Exempt

Sound records for the reproduction of speech, specially adapted for the use of the blind; and instruments specially designed for the reproduction of sound from such records."

(g) with the substitution for Group 24 of the following:—

"GROUP 24


(a) Photographic cameras and photographic enlargers, lenses and other parts of and accessories to photographic cameras and photographic enlargers.
50%


(b) Cinematograph projectors, filmstrip and slide projectors, and parts thereof and accessories thereto; projection screens not exceeding 35 square feet in area; and slide viewers and slide containers, except viewers or containers for use with slides exceeding 3 inches in width.
50%


(c) Unexposed sensitized photographic paper, cloth, plates and film.
50%

Exempt

(1) Cinematograph cameras and cinematograph projectors for film of standard width and parts and accessories suitable only for use therewith.

(2) Cameras, enlargers, cinematograph and filmstrip projectors, and parts thereof, and accessories thereto, being articles suitable only for industrial, scientific or military use.

(3) Epidiascopes. projectors for use with slides exceeding 3 inches in width, and parts and accessories suitable only for use therewith.

(4) Photographic paper, cloth, plates and film, the following:—

(i) cinematograph film of standard width;
(ii) X-ray plates, film and paper;
(iii) ferro-prussiate and ferro-gallic paper and cloth;
(iv) dye-line paper, cloth and film;
(v) document base paper, transparent tracing paper base and tracing cloth."

(h) with the substitution in paragraph (a) of Group 30 for the words "comprised in Group 2" of the words "comprised below or in any other Group".

(j) with the substitution for Group 31 of the following:—

"GROUP 31

comprising Toilet requisites, except face cloths and towels.


(b) Brushes (other than toothbrushes), combs, scissors, nippers, knives, razors, razor blades, razor strops, razor sharpeners, dry shavers and dry shaver heads, mirrors, sponges, dental sticks and toothpicks.
33⅓%


(b) Other articles not comprised below in this Group.
50%

Exempt

Toothbrushes; toilet paper."

(k) with the substitution for Group 32 of the following:—

"GROUP 32

comprising Perfumery; and toilet preparations, whether medicated or not, including cosmetics.


(a) Perfumery
50%


(b) Soap made up for sale as toilet soap; soap substitutes made up for sale as substitutes for toilet soap; baby dusting powders; shaving creams; shampoos; dentifrices; eye lotions, mouth washes and antiseptics; calamine lotion and similar alleviating preparations, unperfumed.
33⅓%


(c) Other articles
50%"

But this Resolution shall not authorise any alteration of a rate such that—
(a) some of the goods chargeable to tax to which one of the following rates, namely, 12½%, 20% and 33⅓%, is under this Resolution to apply would be charged at a rate different from others of those goods; or
(b) any goods chargeable to tax to which the rate of 50% is under this Resolution to apply would be charged at a rate other than either—
(i) the rate charged on goods to which the rate of 33⅓% is under this Resolution to apply; or
(ii) a rate higher than that referred to it sub-paragraph (i) above which is the same for all goods chargeable to tax to which the rate of 50% is under this Resolution to apply which are not charged at the rate referred to in the said subparagraph (i);
and this Resolution shall also not authorise the granting of exemption to any goods chargeable to tax immediately before 20th March 1968.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means Motions), and agreed to.

SURCHARGES AND REBATES IN RESPECT OF REVENUE DUTIES

Motion made, and Question,
That the period after which orders under section 9 of the Finance Act 1961 may not be made or continue in force shall be ex

tended until the end of August 1969.—[Mr. Roy Jenkins.]

put forthwith pursuant to standing Order No. 90(2) (Ways and Means Motions), and agreed to.

VEHICLES EXCISE DUTY

Motion made, and Question,
That, in the case of licences taken out after 19th March 1968—
(a) the annual rates of duty for licences (other than trade licences) for vehicles chargeable in accordance with Schedules 1, 3, 4 and 5 to the Vehicles (Excise) Act 1962 shall be those respectively specified in Parts I to IV of the following Table;
(b) the annual rates (section 12 of the said Act of 1962) of duty for general trade licences shall be increased from £45 to £60 and from £9 to £12, and for limited trade licences shall be increased from £9 to £12 and from £2 to £2 10s.;
(c) in relation to any hackney carriage or goods vehicle which is partly used for private purposes, the duty chargeable by virtue of Schedule 2 or Schedule 4 to the said Act of 1962, as the case may be, shall (if apart from the provisions of this paragraph it would be less) be equal to the duty which would be chargeable in respect of that hackney carriage or goods vehicle if Schedule 5 to that Act, and not the said Schedule 2 or 4, were applicable thereto;
(d) for the purposes of the said Schedule 4, but without prejudice to the provisions of the last foregoing paragraph, a vehicle shall be treated as a farmer's goods vehicle notwithstanding that it is partly used for private purposes if, apart from that use, it would be a farmer's goods vehicle within the meaning of that Schedule.

In paragraphs (c) and (d) of this Resolution "used for private purposes" means—
(a) as respects a hackney carriage, used otherwise than for the purpose of carrying passengers for hire or reward or of being let for hire;
(b) as respects a goods vehicle, used otherwise than for the conveyance of goods or burden for hire or reward or for or in connection with a trade or business (including the performance by a local or public authority of its functions).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

TABLE


PART I


VEHICLES CHARGEABLE IN ACCORDANCE WITH SCHEDULE 1


Description of vehicle
Rate of duty



£
s.
d.


1. Bicycles and tricycles of which the cylinder capacity of the engine does not exceed 150 cubic centimetres; electrically propelled bicycles; electrically propelled tricycles which do not exceed 165 pounds in weight unladen.
2
10
0


2. Bicycles of which the cylinder capacity of the engine exceeds 150 cubic centimetres but does not exceed 250 cubic centimetres; tricycles (other than those in the foregoing paragraph) and vehicles (other than mowing machines) with more than three wheels, being tricycles and vehicles neither constructed nor adapted for use nor used for the carriage of a driver or passenger
5
0
0


3. Bicycles and tricycles not in the foregoing paragraphs.
10
0
0

PART II


VEHICLES CHARGEABLE IN ACCORDANCE WITH SCHEDULE 3



Weight unladen of vehicle
Rate of Duty


1.
2.
3.
4.
5.


Description of vehicle
Exceeding
Not Exceeding
Initial
Additional for each ton or part of a ton in excess of the weight in column 2



£
s.
d.
£
s.
d.


1. Agricultural machines; digging machines; mobile cranes; works trucks; mowing machines
—
—
5
0
0

—



2. Haulage vehicles, being showmen's vehicles
—
7¼ tons
47
0
0

—




7¼ tons
8 tons
56
5
0

—




8 tons
10 tons
65
10
0

—




10 tons
—
65
10
0
9
10
0


3. Haulage vehicles, not being showmen's
—
2 tons
60
0
0

—



vehicles.
2 tons
4 tons
108
0
0

—




4 tons
6 tons
148
10
0

—




6 tons
7¼ tons
189
0
0

—




7¼ tons
8 tons
229
10
0

—




8 tons
—
229
10
0
40
10
0

PART III


VEHICLES CHARGEABLE IN ACCORDANCE WITH SCHEDULE 4


TABLE A


General Rates of Duty






Weight unladen of vehicle
Rate of Duty


1.



2.
3.
4.
5.


Description of vehicle
Exceeding
Not Exceeding
Initial
Additional for each ¼ ton or part of a ¼ ton in excess of the weight in column 2



£
s.
d.
£
s.
d.


1. Farmers' goods vehicles
…
…
…
—
12 cwt.
17
10
0

—







12 cwt.
16 cwt.
19
5
0

—







16cwt.
1 ton
21
0
0

—







1 ton
1¼ tons
22
15
0

—







1¼ tons
2¼ tons
22
15
0
2
0
0






2½ tons
4¼ tons
32
15
0
2
10
0






4¼ tons
5¾ tons
50
5
0
1
0
0






5¾ tons
8¼ tons
56
5
0
1
5
0






8½ tons
—
70
0
0
1
0
0


2. Showmen's goods vehicles
…
…
…
—
12 cwt.
17
10
0

—







12 cwt.
16 cwt.
19
5
0

—







16 cwt.
1 ton
21
0
0

—







1 ton
3 tons
21
0
0
2
0
0






3 tons
4 tons
37
0
0
2
5
0






4 tons
5 tons
46
0
0
2
0
0






5 tons
6 tons
54
0
0
1
15
0






6 tons
—
61
0
0
2
0
0

3. Electrically propelled goods vehicles (other than farmers' goods vehicles or showmen's goods vehicles); tower wagons.
—
12 cwt.
24
0
0
—


12cwt.
16 cwt.
26
5
0
—


16 cwt.
1 ton
29
10
0
—



1 ton
6 tons
29
10
0
3
0
0



6 tons
7 tons
89
10
0
2
10
0



7 tons
8¼ tons
99
10
0
2
15
0



8¼ tons
—
113
5
0
3
0
0


4. Goods vehicles not included in any of the foregoing provisions of this Part of this Schedule.
—
12 cwt.
24
0
0
—


12 cwt.
16 cwt.
30
0
0
—


16 cwt.
1 ton
36
10
0
—



1 ton
1½ tons
36
10
0
6
10
0



1½ tons
2 tons
49
10
0
6
15
0



2 tons
3 tons
63
0
0
7
10
0



3 tons
4 tons
93
0
0
10
10
0



4 tons
—
135
0
0
13
10
0

TABLE B


Rates of Duty on Goods Vehicles used for Drawing Trailers



Weight unladen of vehicle





1.
2.
3.
4.


Description of vehicle
Exceeding
Not Exceeding
Rate of duty





£
s.
d.


1. Showmen's goods vehicles
—
—
17
10
0


2. Electrically propelled goods vehicles (other than farmers'
—
1½ tons
14
0
0


goods vehicles and showmen's goods vehicles); tower
1½ tons
3 tons
24
0
0


wagons.
3 tons
—
27
0
0


3. Other goods vehicles
—
1½ tons
14
0
0



14 tons
2½ tons
24
0
0



2½ tons
4 tons
40
0
0



4 tons
—
54
0
0

PART IV


VEHICLES CHARGEABLE IN ACCORDANCE WITH SCHEDULE 5


Description of vehicle
Rate of duty



£
s.
d.


1. Electrically propelled vehicles; vehicles not exceeding seven horse-power, if registered under the Roads Act 1920 for the first time before 1st January, 1947
18
0
0


2. Vehicles not included above
25
0
0

For the purposes of the Table above, weight, cylinder capacity and horse-power are to be determined, and other expressions interpreted, in accordance with the said Act of 1962.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

INCOME TAX (CHARGE AND RATES FOR 1968–69)

Motion made, and Question,
That income tax for the year 1968–69 shall be charged at the standard rate of 8s. 3d. in the pound, and, in the case of an individual whose total income exceeds £2,000, at such higher rates in respect of the excess as Parliament may hereafter determine.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

INCOME TAX (SURTAX RATES FOR 1967–68)

Motion made, and Question,
That income tax for the year 1967–68 shall be charged, in the case of an individual whose total income exceeded £2,000, at the same higher rates in respect of the excess as were charged for the year 1966–67.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

INCOME TAX (ALTERATIONS IN PERSONAL RELIEFS)

Motion made, and Question,
That—
(a) for the year 1968–69 and subsequent years of assessment, section 13 of the Finance Act 1957 (relief for persons over 65


with small incomes) shall be amended by substituting—
(i) for the references to £401 and £643 (the income limits for exemption from tax), references to £415 and £665, and
(ii) for the reference to £180 (the excess over those limits beyond which relief by reduction of tax is excluded), a reference to £230;
(b) section 210(1) of the Income Tax Act 1952 (married and single relief) shall for the year 1968–69 and subsequent years of assessment have effect in relation to any claim made by a man who becomes married in the year for which the claim is made, and who has not previously in that year been entitled to the higher relief specified in paragraph (a) thereof (married relief), as if the sum specified for that year in that paragraph were reduced, for each month of that year ending before the date of the marriage ("month" meaning one beginning with the 6th day of a month of the calendar year), by one-twelfth of the amount by which it exceeds the sum specified in paragraph (b) (single relief);
(c) where for the year 1968–69 an individual is assessable to income tax in respect of payments on account of an allowance or allowances under the Family Allowances Act 1965 or the Family Allowances Act (Northern Ireland) 1966, the total deductions from tax to which, apart from this paragraph, the individual (or, if the individual is a wife, assessable in respect of the payments by virtue of an application for separate assessment under section 355 of the Income Tax Act 1952, she and her husband together) would he entitled for the year under sections 210 and 212 to 219 of the said Act of 1952 (certain personal reliefs) shall be reduced, for each allowance if more than one, by an amount equal to tax at the standard rate on £36 or, if the payments in question are payments for a part only of the year, by the following amount or amounts—
(i) so far as the payments consist of or include payments for, or for a period falling within, the first half of the year, by an amount, or the proportionate part of an amount, equal to tax at the standard rate of £15, and
(ii) so far as the payments consist of or include payments for, or for a period falling within, the second half of the year, by an amount, or a proportionate part of an amount, equal to tax at the standard rate on £21;
(d) the allowances referred to in paragraph (c) above shall be treated as including any allowance payable to an individual in the service of the Crown in lieu of an allowance under either of the enactments there specified;
(e) the said paragraph (c) shall not apply in the case of any payments of the individual assessable in respect thereof is entitled in the year—
(i) to a widow's allowance, widowed mother's allowance, retirement pension or child's special allowance under the National Insurance Act 1965 or the

National Insurance Act (Northern Ireland) 1966, or
(ii) to an allowance under section 21 of the National Insurance (Industrial Injuries) Act 1965 or section 21 of the National Insurance (Industrial Injuries) Act (Northern Ireland) 1966 (allowances in respect of children of deceased), or
(iii) to an allowance granted by the Minister of Social Security under a Royal Warrant, Order in Council or order administered by him to widows of members of the armed forces;
(f) the said paragraph (c) shall not affect the construction of any reference in the Income Tax Acts to the deduction allowable under any particular provision of those referred to in that paragraph;
(g) the preceding provisions of this Resolution shall not require any change to be made in the amounts deducted or repaid under section 157 of the Income Tax Act 1952 (pay as you earn) before 27th April 1968.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order 90(2) (Ways and Means motions), and agreed to.

INCOME TAX (LIFE POLICIES, LIFE ANNUITY CONTRACTS AND CAPITAL REDEMPTION POLICIES).

That—
(a) for the year 1967–68 and subsequent years of assessment—
(i) relief under section 219 of the Income Tax Act 1952 in respect of premiums under policies of life insurance may, in the case of insurances made after 19th March 1968, be restricted to premiums under policies complying with certain conditions, and
(ii) restrictions may be imposed on the operation of section 241(3)(d) of the said Act (surtax deduction permissible in respect of interest on money borrowed to pay premiums if premiums in each year not greater than one-eighth of sum payable on death) in relation to interest and other payments on money borrowed after the said 19th March, and
(b) for the year 1968–69 and subsequent years of assessment, provision may be made for charging to surtax, and to tax under section 77 of the Finance Act 1965 (shortfall in distributions of close company), the amount of any gain falling to be treated for the purposes of that provision as arising in connection with any policy of life insurance issued in respect of an insurance made after the said 19th March, any contract for a life annuity entered into after that date or any capital redemption policy effected after that date ("life annuity" having here the same meaning as in section 27 of the Finance Act 1956, and "capital


redemption policy" meaning any insurance effected in the course of a capital redemption business as defined in section 431 of the said Act of 1952).—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

INCOME TAX (STOCK DIVIDEND OPTIONS)

Motion made, and Question,
That for the year 1967–68 and subsequent years of assessment charges to income tax may be imposed by providing that share capital issued by a company in consequence of a person's exercise of an option conferred on or after 19th March 1968 to receive either a cash dividend or share capital is to be treated for the purposes of the Corporation Tax Acts as a distribution by the company, having a value equal to the gross amount of the dividend which the person could have accepted instead.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

INCOME TAX (GENERAL ANNUITIES PAID BY NON-RESIDENT LIFE ASSURANCE COM PANIES).

Motion made, and Question,
That charges to income tax, including charges for past years of assessment, may be imposed by providing that a life assurance company not resident in the United Kingdom may not treat as paid out of profits or gains brought into charge to income tax any annuities paid by the company which are referable to its general annuity business.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

CORPORATION TAX (CHARGE AND RATE FOR FINANCIAL YEAR 1967)

Motion made, and Question,
That corporation tax shall be charged for the financial year 1967 at the rate of 42½ per cent.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PROFITS NOT COMPUTED ON EARNINGS BASIS (INCOME TAX AND CORPORATION TAX.)

Motion made, and Question,
That charges to income tax and corporation tax, including charges for past years of assessment and accounting periods, may be imposed by provisions about any trade, profession or vocation the profits or gains of which for any

past or future period have been computed otherwise than by reference to earnings.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

COMPANY PARTNERSHIPS (INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX).

Motion made, and Question,
That charges to income tax, corporation tax and capital gains tax may be imposed by amendments of section 73 of the Finance Act 1965.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

INDUSTRIAL INFORMATION AND TECH NIQUES (INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX).

Motion made, and Question,
That charges to income tax, corporation tax and capital gains tax, including charges for past years of assessment or accounting periods, may be made—
(a) by provisions about industrial information and techniques, including anything commonly called know-how, and
(b) by provisions about the granting or creation of restrictive covenants or obligations connected with the disposition of industrial information or techniques.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

DOUBLE TAXATION RELIEF (INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX).

Motion made, and Question,
That where credit for foreign tax falls to be allowed in respect of any income or gains, new provision may be made for computing the amount of the income or gains for the purposes of income tax, corporation tax and capital gains tax, and as to the amount of credit to be allowed.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

CAPITAL GAINS (CAPITAL GAINS TAX, CORPORATION TAX AND INCOME TAX)

Motion made, and Question,
That charges to capital gains tax, corporation tax and income tax may be imposed by provisions about—
(a) assets held on 6th April 1965,


(b) wasting assets,
(c) the Government securities listed in Schedule 9 to the Finance Act 1965 (securities issued at a discount),
(d) the disposal of debts,
(e) death as an occasion of charge to capital gains tax,
(f) the transfer of any business or part of a business,
(g) companies which are or have been members of a group of companies,
(h) companies and other persons resident outside the United Kingdom, and about persons who are in any way connected with persons so resident,
(i) the adjustments to be made in taxing chargeable gains to take account of the law about income tax on short-term gains,
(j) any feature of the law about income tax on short-term gains,
and that those provisions may take effect so as to impose charges to tax for years of assessment from 1967–68 onwards, and for any accounting period ending on or after 19th March 1968, and, in the case of such of those provisions as are connected with companies which are or have been members of a group, charges to tax for earlier years of assessment or accounting periods.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

TAX ON CAPITAL GAINS (CONSEQUENTIAL CHARGES)

Motion made, and Question,
That it is expedient to authorise any charges to capital gains tax, or any charges to corporation tax in respect of chargeable gains, including a charge for a past year of assessment or accounting period, attributable to any amendment of the Income Tax Acts, or attributable to any amendment of the Corporation Tax Acts as respects tax payable in respect of the income of any company.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

ESTATE DUTY

Motion made, and Question,
That in the case of a death after 19th March 1968—
(a) periods of seven years before the date of the death shall be substituted for the periods of five years which are material for estate duty purposes in relation to gifts inter vivos and in certain other circumstances and that new provision be made for the graduation of the charge to estate duty under section 64 of the Finance Act 1960,

(b) the exemptions conferred by section 59(2) of the Finance (1909–10) Act 1910 in respect of marriage gifts, and gifts which are part of normal expenditure, may be withdrawn or restricted,
(c) further provision may be made as to the aggregation of property for the purposes of estate duty, and as respects property passing wholly or partly under section 2(1)(c) of the Finance Act 1894,
(d) provision may be made as to the persons to be treated for the purposes of estate duty as having an interest in property where all or part of the property, or of the income from the property, is subject to discretionary trusts, and as to the nature of the interest.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

SPECIAL CHARGE

Motion made, and Question,
That where the investment income of an individual for the year 1967–68, ascertained as Parliament may determine, exceeds £3,000 plus his surtax personal allowances, as so ascertained, there shall be made a special charge in accordance with the following Table, together with interest from such time as Parliament may determine.

TABLE


For every pound of


the first thousand pounds the excess of
2 shillings


the next thousand pounds of the excess
3 shillings


the next three thousand pounds of the excess
6 shillings


the remainder of the excess
9 shillings

—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

SELECTIVE EMPLOYMENT TAX

Motion made, and Question,
That the weekly amount payable by way of selective employment tax in respect of any person shall be increased—
(a) if that person is a man over the age of 18, to 37s. 6d.;
(b) if that person is a woman over the age of 18, to 18s. 9d.;
(c) if that person is a boy under the age of 18, to 18s. 9d.;
(d) if that person is a girl under the age of 18, to 12s.;
but this Resolution shall not authorise the making of amendments of the enactments relating to that tax so as to give relief from tax—

(1) by way of exemption from, or an alteration in the rate of, tax except in respect of all persons of the same descriptions relevant for determining the rate of the employer's flat-rate contribution with which the tax is combined, whether that contribution is under the National Insurance Acts or under the corresponding enactments in Northern Ireland; or

(2) by way of providing for payments to employers of an amount equal to the whole or a specified part of the tax paid if the proposed provision—
(i) is in respect of employers in part only of Great Britain, unless that part is included in the areas specified as development areas under section 15(2) of the Industrial Development Act 1966; or
(ii) extends to employers in Northern Ireland; or

(iii) is in respect of all persons in any particular description of employment in all parts of Great Britain, and relief in respect of the whole of the tax paid could be given in respect of that description of employment by an order under section 9(1)(a) of the Selective Employment Payments Act 1966 adding that description of employment to the employments to which section 1 or 2 of that Act applies; or

(3) by adding or removing any employer to or from the employers to whom section 3 of the said Act of 1966 applies; or

(4) by amending the provisions of Schedule 1 or Schedule 2 to the said Act of 1966.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order 90(2) (Ways and Means motions).

The House divided: Ayes 266, Noes 9.

Division No. 100.]
AYES
[10.20 p.m.


Abse, Leo
Dempsey, James
Howarth, Robert (Bolton, E.)


Albu, Austen
Dewar, Donald
Howell, Denis (Small Heath)


Allaun, Frank (Salford, E.)
Diamond, Rt. Hn. John
Howie, W.


Alldritt, Walter
Dickens, James
Hoy, James


Allen, Scholefield
Dobson, Ray
Huckfield, Leslie


Archer, Peter
Doig, Peter
Hughes, Rt. Hn. Cledwyn (Anglesey)


Atkins, Ronald (Preston, N.)
Driberg, Tom
Hughes, Emrys (Ayrshire, S.)


Atkinson, Norman (Tottenham)
Dunn, James A.
Hunter, Adam


Bacon, Rt. Hn. Alice
Dunnett, Jack
Hynd, John


Bagier, Gordon A. T.
Dunwoody, Mrs. Gwyneth (Exeter)
Irvine, Sir Arthur


Barnes, Michael
Dunwoody, Dr. John (F'th &amp; C'b'e)
Jackson, Colin (B'h'se &amp; Spenb'gh)


Barnett, Joel
Eadie, Alex
Jackson, Peter M. (High Peak)


Beaney, Alan
Edelman, Maurice
Janner, Sir Barnett


Bence, Cyril
Edwards, Rt. Hn. Ness (Caerphilly)
Jay, Rt. Hn. Douglas


Benn, Rt. Hn. Anthony Wedgwood
Edwards, William (Merioneth)
Jeger, Mrs. Lena (H'b'n &amp; St-P'cras, S.)


Bennett, James (G'gow, Bridgeton)
Ellis, John
Jenkins, Hugh (Putney)


Bidwell, Sydney
English, Michael
Jenkins, Rt. Hn. Roy (Stechford)


Binns, John
Ennals, David
Johnson, Carol (Lewisham, S.)


Bishop, E. S.
Eneor, David
Johnson, James (K'ston-on-Hull, W.)


Blackburn, F.
Evans, Ioan L. (Birm'h'm, Yardley)
Jones, Dan (Burnley)


Blenkinsop, Arthur
Faulds, Andrew
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Booth, Albert
Fernyhough, E.
Jones, J. Idwal (Wrexham)


Bottomley, Rt. Hn. Arthur
Finch, Harold
Jones, T. Alec (Rhondda, West)


Boyden, James
Fitch, Alan (Wigan)
Judd, Frank


Braddock, Mrs. E. M.
Fletcher, Raymond (Ilkeston)
Kenyon, Clifford


Bradley, Tom
Fletcher, Ted (Darlington)
Kerr, Dr. David (W'worth, Central)


Bray, Dr. Jeremy
Foot, Rt. Hn. Sir Dingle (Ipswich)
Kerr, Russell (Feltham)


Brooks, Edwin
Foot, Michael (Ebbw Vale)
Lawson, George


Brown, Bob (N'c'tle-upon-Tyne, W.)
Ford, Ben
Leadbitter, Ted


Brown, Rt. Hn. George (Belper)
Forrester, John
Lee, Rt. Hn. Frederick (Newton)


Brown, Hugh D. (G'gow, Provan)
Fowler, Gerry
Lee, John (Reading)


Buchan, Norman
Fraser, John (Norwood)
Lestor, Miss Joan


Buchanan, Richard (G'gow, Sp'burn)
Garrett, W. E.
Lever, Harold (Cheetham)


Butler, Herbert (Hackney, C.)
Ginsburg, David
Lewis, Ron (Carlisle)


Callaghan, Rt. Hn. James
Gordon Walker, Rt. Hn. P. C.
Lomas, Kenneth


Cant, R. B.
Gour lay, Harry
Loughlin, Charles


Carmichael, Neil
Gray, Dr. Hugh (Yarmouth)
Luard, Evan


Carter-Jones, Lewis
Gregory, Arnold
Lyon, Alexander W. (York)


Castle, Rt. Hn. Barbara
Grey, Charles (Durham)
Lyons, Edward (Bradford, E.)


Coe, Denis
Griffiths, David (Rother Valley)
Mabon, Dr. J. Dickson


Coleman, Donald
Griffiths, Will (Exchange)
McCann, John


Concannon, J. D.
Hamilton, James (Bothwell)
MacColl, James


Conlan, Bernard
Hamilton, William (Fife, W.)
MacDermot, Niall


Craddock, George (Bradford, S.)
Hannan, William
Macdonald, A. H.


Crawshaw, Richard
Harper, Joseph
McGuire, Michael


Crosland, Rt Hn. Anthony
Harrison, Walter (Wakefield)
Mackenzie, Gregor (Rutherglen)


Grossman, Rt. Hn. Richard
Hattersley, Roy
Mackie, John


Cullen, Mrs. Alice
Hazell, Bert
Mackintosh, John P.


Dalyell, Tam
Healey, Rt. Hn. Denis
Maclennan, Robert


Darling, Rt. Hn. George
Heffer, Eric S.
McNamara, J. Kevin


Davidson, Arthur (Accrington)
Henig, Stanley
MacPherson, Malcolm


Davies, Dr. Ernest (Stretford)
Herbison, Rt. Hn. Margaret
Mahon, Peter (Preston, S.)


Davies, G. Elfed (Rhondda, E.)
Hilton, W. S.
Mahon, Simon (Bootle)


Davies, Ednyfed Hudson (Conway)
Hobden, Dennis (Brighton, K'town)
Mallalieu, E. L. (Brigg)


Davies, Ifor (Gower)
Houghton, Rt. Hn. Douglas
Mallalieu, J. P. W. (Huddersfield, E.)


Dell, Edmund
Howarth, Harry (Wellingborough)
Manuel, Archie




Mapp, Charles
Peart, Rt. Hn. Fred
Swingler, Stephen


Marks, Kenneth
Pentland, Norman
Thomas, George (Cardiff, W.)


Marquand, David
Perry, Ernest G. (Battersea, S.)
Thornton, Ernest


Marsh, Rt. Hn. Richard
Perry, George H. (Nottingham, S.)
Tomney, Frank


Mason, Rt. Hn. Roy
Prentice, Rt. Hn. R. E.
Tuck, Raphael


Mellish. Rt. Hn. Robert
Price, Christopher (Perry Barr)
Urwin, T. W.


Mendelson, J. J.
Price, Thomas (Westhoughton)
Varley, Eric G.


Mikardo, Ian
Reynolds, C. W.
Wainwright, Edwin (Dearne Valley)


Millan, Bruce
Roberts, Gwilym (Bedfordshire, S.)
Walden, Brian (All Saints)


Miller, Dr. M. S.
Robertson, John (Paisley)
Walker, Harold (Doncaster)


Milne, Edward (Blyth)
Robinson, Rt. Hn. Kenneth (St. P'c'as)
Wallace, George


Mitchell, R. C. (S'tn'pton, Test)
Robinson, W. O. J. (Walth'stow, E.)
Watkins, David (Consett)


Money, William
Rodgers, William (Stockton)
Watkins, Tudor (Brecon &amp; Radnor)


Morgan, Elystan (Cardiganshire)
Roebuck, Roy
Weitzman, David


Morris, Alfred (Wythenshawe)
Rose, Paul
Wellbeloved, James


Morris, Charles R. (Openshaw)
Ross, Rt. Hn. William
Wells, William (Walsall, N.)


Moyle, Roland
Rowlands, E. (Cardiff, N.)
Whitaker, Ben


Multey, Rt. Hn. Frederick
Ryan, John
White, Mrs. Eirene


Murray, Albert
Shaw, Arnold (Ilford, S.)
Whitlock, William


Newens, Stan
Sheldon, Robert
Witkins, W. A.


Noel-Baker, Rt. Hn. Philip (Derby, S.)
Shore, Rt. Hn. Peter (Stepney)
Williams, Alan Lee (Hornchurch)


Norwood, Christopher
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Williams, Clifford (Abertillery)


Oakes, Gordon
Silkin, Rt. Hn. John (Deptford)
Williams, Mrs. Shirley (Hitchin)


Ogden, Eric
Silkin, Hn. S. C. (Dulwich)
Willis, Rt. Hn. George


O'Matley, Brian
Silverman, Julius (Aston)
Wilson, Rt. Hn. Harold (Huyton)


Oram, Albert E.
Skeffington, Arthur
Wilson, William (Coventry, S.)


Orme, Stanley
Slater, Joseph
Winnick, David


Oswald, Thomas
Small, William
Woodburn, Rt. Hn. A.


Owen, Dr. David (Plymouth, S'tn)
Snow, Julian
Wyatt, Wood row


Palmer, Arthur
Spriggs, Leslie
Vates, Victor


Pannell, Rt. Hn. Charles
Stewart, Rt. Hn. Michael



Parker, John (Dagenham)
Strauss, Rt. Hn. G. R.
TELLERS FOR THE AYES:


Parkin, Ben (Paddington, N.)
Summerskill, Hn. Dr. Shirley
Mr. Neil McBride and


Parkyn, Brian (Bedford)
Swain, Thomas
Mr. Ernest Armstrong.




NOES


Bessell, Peter
Johnston, Russell (Inverness)



Davidson, James (Aberdeenshire, W.)
Pardoe, John
TELLERS FOR THE NOES:


Ewing, Mrs. Winifred
Thorpe, Rt. Hn. Jeremy
Mr. Eric Lubbock and


Hirst, Geoffrey
Wainwright, Richard (Colne Valley)
Mr. David Steel.


Hooson, Emlyn

INTEREST ON OVERDUE TAX

Motion made, and Question,
That, as respects tax becoming due and payable on or after 1st July 1968, two months shall be substituted for three months in section 495(2) of the Income Tax Act 1952 and in section 8(2) of the Finance (No. 2) Act 1947 (remission of interest for income tax, corporation tax, capital gains tax, profits tax and excess profits tax where paid within three months of the due date).—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

BETTERMENT LEVY (MINERALS)

Motion made, and Question,
That further provision may be made as to the application of Part III of the Land Commission Act 1967 to minerals and mining leases and royalties, with any consequential adjustment of the relationship between betterment levy and income tax or corporation tax, and that the new provisions shall apply to mining leases granted on or after 6th April 1968 and may, on the making of an election, apply to mining leases granted before that date.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PROVISIONAL COLLECTION OF TAXES

Motion made, and Question,
That amendments may be made to the Provisional Collection of Taxes Act 1968. [Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)

Motion made, and Question,
That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) which may arise from provisions designed in general to afford relief from taxation.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PROCEDURE (CHILDREN'S INCOME OTHER THAN EARNED INCOME)

Motion made, and Question,
That notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, provision may be made in any


Finance Bill of the present Session with respect to the treatment for the purposes of income tax in the year 1969–70 and subsequent years of assessment of the income (other than earned income) of persons below the age of 21.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PROCEDURE (EXCHANGE CONTROL)

Motion made, and Question,
That notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, provision may be made in any Finance Bill of the present Session for making amendments of any provisions contained in, or having effect under, the Exchange Control Act 1947, section 2 of the Emergency Laws (Re-enactments and Repeals) Act 1964 or any other enactment relating to exchange control, being amendments the main purpose of which is to extend the meaning of "security" in those provisions, and which apply outside the United Kingdom in the same way as those enactments apply outside the United Kingdom.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PROCEDURE (SUGAR ACT 1956)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, provision may be made in any Finance Bill of the present Session with respect to surcharges under the Sugar Act 1956.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order No. 90(2) (Ways and Means motions), and agreed to.

PROCEDURE (SOCIAL SERVICES AGREEMENT WITH NORTHERN IRELAND)

Motion made, and Question,
That notwithstanding anything to the contary in the practice of the House relating to the matters which may be included in Finance Bills, provision may be made in any Finance Bill of the present Session for confirming and giving effect to any agreement between the Treasury and the Ministry of Finance for Northern Ireland which amends the agreement relating to social and allied services scheduled to the Social Services (Northern Ireland Agreement) Act 1949.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order 90(2) (Ways and Means motions), and agreed to.

FINANCE [MONEY]

Queen's Recommendation having been signified—

Motion made and Question,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—
(1) the payment out of moneys provided by Parliament of any increase in the sums so payable under any other Act which is attributable to any provision of that Act of the present Session—
(a) providing for relief from selective employment tax by way of the payment to employers of amounts not exceeding the amount of that tax paid by them; or
(b) increasing the amount of that tax; or
(c) increasing by 4d. per gallon the limit of the grants which may be made to operators of bus services under section 92 of the Finance Act 1965, and
(2) the payment out of the Consolidated Fund of any additional sums which, by virtue of any agreement confirmed by that Act of the present Session, are payable from the Exchequer of the United Kingdom to the Exchequer of Northern Ireland under the agreement relating to social and allied services scheduled to the Social Services (Northern Ireland Agreement) Act 1949.—[Mr. Roy Jenkins.]

put forthwith pursuant to Standing Order 90(2) (Ways and Means Motions), and agreed to.

Bill ordered to be brought in upon the Resolutions relating to Ways and Means and Finance [Money], and the Orders relating to Procedure agreed to this day: to be brought in by The Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. John Diamond, and Mr. Harold Lever.

FINANCE

Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance, presented accordingly and read the First time; to be read a Second time Tomorrow and to be printed. [Bill 111.]

RATE SUPPORT GRANT (SCOTLAND)

10.32 p.m.

The Minister of State, Scottish Office (Dr. J. Dickson Mabon): I beg to move,
That the Rate Support Grant (Increase) (Scotland) Order 1968, dated 4th March, 1968, a copy of which was laid before this House on 7th March, be approved.
This increase Order is made under Section 4 of the Local Government (Scotland) Act, 1966, and is seeks to increase the amount of rate support grant payable to local authorities in Scotland in respect of reckonable expenditure in 1967–68 and 1968–69. As is required by the 1966 Act, the Order is accompanied by an explanatory report which was laid at the same time as the Order and has been printed as House of Commons Paper No. 140. The present Order replaces one which was laid on 21st December and withdrawn at the end of last month.
There is only one difference between them, but it is an important one for local authorities in Scotland. The Order now before the House includes an additional £5.218 million of reckonable expenditure and an additional £3.32 million of rate support grant in respect of the increase in teachers' pay which was agreed to on 1st March and comes into effect on 1st April.
The fact that such an increase was impending, and that the corresponding increase in England and Wales came into effect last August, and was covered by the increase Order which the House approved on 14th December constituted the special problem which was referred to by the Prime Minister in his statement on public expenditure on 16th January. We have now dealt with it by putting Scottish local authorities in exactly the same position as those in England and Wales. All increased salary costs arising from the award are covered by the Order, except for the increases in the pay of teachers in further education. These, in England and Wales, were the subject of a separate award which the 1967 Increase Order did not take into account.
As the House will recall, the main feature of the new grant system which was introduced on the 15th May last is that, for the first time, the whole expenditure of local authorities on rating ser

vices, excluding only the housing revenue account and the trading services, is taken into account in calculating how much the total of Exchequer assistance is to be. The total is determined as a percentage of the estimated reckonable expenditure, the revenue grants for specific services are deducted from it, and the balance represents the amount of the rate support grant.
Hon. Members may find it helpful, since some have now got the House of Commons Paper, if I refer briefly to what the Act says about the costing basis both for main orders and for increase orders. Section 2, under which the main Order is made, requires the Secretary of State, in consultation with the local authority associations, to take into consideration
…the current level of prices, costs and remuneration, any future variation in that level which can be foreseen and the latest information available to him as to the rate of reckonable expenditure.
In other words, expenditure is estimated for both years of the grant period on the basis of the prices current at the date of making the order, allowing only for future variations of which the amount and date are accurately known in advance.
Section 3, under which increase orders are made, empowers the Secretary of State to redetermine the total of Excheque assistance if it appears to him that, since the amounts in the main Order were determined,
…an unforeseen increase has taken place in the level of prices, costs and remuneration and that the effect of the increase on the reckonable expenditure of local authorities…is substantial.
In other words, the grant is estimated on the basis of forward projections of expenditure at constant prices and may then be adjusted retrospectively to allow for significant price changes after they have taken place and their effects can be quantified. As we all appreciate, this is quite different from the basis on which local authorities prepare their own budget estimates, since they have to fix a rate to cover their actual expenditure for the year at out-turn prices.
The Order which the House approved on 21st February last year fixed the aggregate of the rate support grants at £149,790,000 for 1967–68 and £159,210,000


for 1968–69. These amounts, as the accompanying Report explained, represented 62½ per cent. of £264·3 million of reckonable expenditure for the first year and 63½ per cent. of £276·2 million for the second, less £15·4 million and £16·17 million of specific revenue grants.
The Order now before the House increases those amounts to £155,440,000 and £157,740,000, representing the same percentages of reckonable expenditure now estimated at £274·5 million and £290·75 million, less specific grants of £16·125 million and £16·89 million. I think that it is necessary to put these figures on the record, even though they are in the Report, to emphasise the parallel features of this Order and the withdrawn Order, and I hope that hon. Members can see the significant difference in the one item which has been changed. These are increases of £10·20 and £14·56 million in reckonable expenditure, £5·65 and £8·53 million in rate support grants, and £0·722 million and £0·718 million in specific grants.
The three local authority associations have expressed their agreement with the figures shown in the Report. I would like to say how much I appreciate the help that we have had from the local authority associations and the harmony of views which has, in general, prevailed.
Hon. Members will find in the Appendix to the Report accompanying the Order a list of the main factors which make up the increases.
I have no doubt that, with the generosity which the House usually affords a Minister on these occasions, if comments are made and questions asked which require an answer, I will, with permission, be allowed to reply.

10.40 p.m.

Mr. Gordon Campbell: I and some of my hon. Friends will have some questions which we hope that the Minister of State will be able to answer. The Order covers increases for 1967–68 and 1968–69. In the case of Scotland, the rate support year runs, but from 15th May to 14th May. This is presumably why the Government have been able to bring it forward so late in the year, though the English Order was considered in December.
Under the Act the Government can bring forward an order to make increases only in respect of extra expenditure which was unforeseeable a year ago. The main Order was approved by the House a year ago and was to run for two years. The one thing which was foreseeable a year ago was that, with the policies of this Government, there would be extra costs falling on local authorities. So this is not surprising. Indeed, it was not unforeseeable. But was it possible to quantify it accurately? Clearly it was not. The Minister of State said that only accurate increases can be brought before the House. Though in general it could be foreseen that there would be increasing costs as a result of Government policies, it evidently was not possible in particular to foresee where they would fall.
The Order was made on 4th March and, therefore, cannot have taken into account the Budget, which was announced on 19th March, and its effects, which will be considerable, upon local authorities in both of the years in question. It will have the effect, if the Finance Bill goes through with most or all of the Budget proposals, of increasing local authorities' reckonable expenditure in both years. This will mean a substantial Rate Increase Order in a year's time, particularly for transport and supplies. These are two of the headings in the accompanying statement.
Would it not be correct for this Increase Order to be withdrawn, because the additional transport costs in the coming year can be accurately calculated, because the exact extra amounts per vehicle belonging to and being used by local authorities can be calculated almost to within £100. Although extra expenditure on transport is now foreseeable and can be calculated accurately, does this have to wait until an Increase Order in a year's time, or should not this Order be withdrawn and another brought in before 15th May? I would like the Minister of State to tell the House the answer to this procedural point.
As the devaluation decision was taken by the Government on 18th November—over four months ago—to what extent have the extra costs which will arise from devaluation been reflected in the Order? For example, there must be some extra costs in the current year arising from the higher prices of imports,


as these will be reflected in school-building costs.
That brings me to the question of interest rates, because one of the largest items in these increases is the additional amount in interest rates, £1·3 million this year, and nearly £1·5 million in the second year. How has this extra cost in interest rates been calculated for 1968–69, a period which we have not yet entered? How much of the higher interest rate period since devaluation on 18th November has been taken into account in putting forward these figures? These are questions which I hope the Minister will be able to answer, because two major events have taken place affecting the costs of local authorities in Scotland. The first is devaluation just over four months ago, and the second is the Budget. We must be told how the increases which are to be dealt with in this Order are related to these major events which will have such a great effect on both the years in question.
I end with the most important question of all. It is certainly the most important question to all ratepayers in Scotland. Can the Minister give us an estimate of the increase in the amount which will have to be paid by ratepayers in Scotland for 1968? I do not mind whether the Minister takes the calendar year, the financial year, or the rate support year running from May to May. The Minister has in the past—I think my hon. Friends will remember this—"had a go" at this when we have asked him for estimates.

Dr. Dickson Mabon: With no thanks for it at all.

Mr. Campbell: I thank the Minister now, because he has in the past made an estimate. Usually events have more or less doubled the estimate, or at any rate increased it substantially, but at least it will be something if, when he introduces the Order, the Minister can say what the future will have for the ratepayers, because what they really want to know is how much extra they will have to pay.
Following the Chancellor who has, with this Budget, for the first time—pressed by me and others from this side of the House—given his short-term estimates over the next year and a half, I

hope that the Minister will again be able to give us some estimate of the increase which Scottish ratepayers will face in the current year. This is perhaps the most important thing which all ratepayers will want to know from this debate.

10.47 p.m.

Mr. William Baxter: I cannot understand the approach of the hon. Member for Moray and Nairn (Mr. G. Campbell) to this problem. He seems to be implying that the increased costs of local authorities are not justified, or are not necessary. If he believes, as we assume he does, that it is desirable to build schools, to provide improved roads, and to increase all the social services, surely he accepts that these have to be paid for either by the ratepayers or by the central Government? As my hon. Friend rightly said, the Appendix shows how the money is being increased for various services. I think that this is ample justification for us agreeing to this Order and supporting it wholeheartedly.
As my hon. Friend said, there will be a considerable increase in grants to the local authorities during the next financial year. The hon. Gentleman says that no regard has been paid to the increase in transport costs, but he seems not to have looked at the figures. Of course the increase in transport costs and other increases must be taken into consideration when compiling these figures.

Mr. G. Campbell: I cannot remember whether the hon. Gentleman took part in the debate on this subject just over a year ago, but we then had the main Order, the Rate Support Grant (Scotland) Order, and what we are now considering are the extra increases in costs since then. I am merely asking the Government to explain how much has been taken into account, in deciding on the money to be paid to local authorities. We want to know how much will be covered by this Order, and how much will need to be covered by the next one in a year's time.

Mr. Baxter: We will deal with the next one when it comes along.
Sufficient unto the day is the evil thereof.
The hon. Member should devote his energies and talents to criticising the Order before us—and the only criticism he seemed to levy against it was in respect


of the increased expenditure. He asked why this should be. The explanation is simple; the increase represents the increase in the social services—education, school milk, and meals for children. We have a list totalling the full amount of the extra expenditure.
The hon. Member devoted some time to the question of transport charges, and asked whether they were included in the Order. Transport charges could well be included in it. The full amount may not be, but a good proportion of it could be, because transport charges for any local authority are levied against each department. There are transport charges for the health department, and considerable transport charges for the roads department, and so on. There is no justification for the hon. Member's criticism that my right hon. and hon. Friend have not had regard to the increased transport charges.
I am concerned about the fact that we have a slight increase in respect of the support grant for civil defence costs. I cannot understand why this should be so, in view of the Chancellor's statement in his Budget speech. We may have an explanation of that.
An opportunity is being lost in presenting these support grants, to the extent that one of the great problems of local authorities is getting grants for roads, for example. It may be that at the end of a local authority's financial year the full amount of the grant for that year has not been used. Such a local authority has to bring in many contractors, who work overtime and receive excessive charges for the work they do, in order that the full amount of grant may be used up within the financial year. This is fundamentally wrong.
Once again an error of judgment has occurred in this respect. No machinery has been introduced to permit a local authority to carry over from one financial year to the next any grant money that has not been used up. A great wastage of public money is involved in local authorities trying to utilise these grants before the end of the financial year. I should have thought that my right hon. and hon. Friends could have devoted a little more ingenuity towards trying to solve this problem, which has confronted authorities for many years.
I do not wish to elaborate on this point, nor do I wish to detain the Committee. I welcome the increased grants, although I believe that the time is opportune for a new look at the whole structure of local government rating. This is unfortunately continuing without any regard to a proper approach being made. It may be that after the Royal Commission has reported on the development of local government there will be a debate, and we may be able to consider the best way of raising local authority finances. That is a subject which will take much longer than the time available in this short debate. I generally welcome the increased grants to Scottish local authorities, and I know that they will greatly welcome them.

10.54 p.m.

Mr. W. H. K. Baker: The Minister of State for Scotland said that these increases have been welcomed by the Association of Local Authorities. He referred to the report pursuant to the issue of the original increase Order No. 140. Paragraph 4 says:
Consultations have taken place with the associations of local authorities concerned…
In November, I understand that Glasgow asked for further subventions, which were refused, and recommended a differential in the disbursements. Had the formula been altered, my county council would have benefited by £219 per year—not a large amount in any terms these days, but the county treasurer of Banff would have been delighted with even that. This could have been a beneficial fall-out from Glasgow.
This increase, whether for 1967–68 or for 1968–69, will be disbursed under the existing formula. I understand that the Secretary of State has invited the associations of local authorities to submit proposals for a new formula for 1969–70, which will mean another increase Order. Can we be assured—I have asked for this before—that the small, remoter areas, such as my county, will be considered sympathetically in any new formula, since very few are hit hard by the present method?
The roads portion of the needs element is fixed as bearing to the aggregate needs element the proportion which two-thirds of the expenditure on roads bears to the total expenditure less the specific


grants. Such amounts are essential for general maintenance and for improvement of roads. The present disbursement, even this proportion, bears very hardly on areas like Banff, which has 11 small burghs, even smaller than the small burgh capacity: one has a population of only 700. Nevertheless, even with a small population—

Mr. Deputy Speaker (Sir Eric Fletcher): I am afraid that it is out of order in discussing this Order to argue for a different formula or a different method of distributing the rate support grant.

Mr. Baker: I am sure that the Minister of State is well apprised of the situation, but I naturally bow to your Ruling, Mr. Deputy Speaker.
I have referred to the roads portion of the needs element and there is no provision by the Act or by this Order for frost damage to roads. In the current financial year Banff County Council have had to face expenditure estimated at £2,500. Last year it was only £50. I hope that the Minister of State will tell us that that additional expenditure will be met from other funds.
My hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) referred to the extra costs likely to fall on local authorities, both in the current financial year and in the following financial year, as a result of the Transport Bill. Banff County Council have done a summation, and it reckons that the Transport Bill will lead to an increase in costs of the services of up to 10 per cent. The Minister of State shakes his head. Does he know that that figure is wrong? Perhaps he will give the House his figure. That is the summation which has been done.
The impositions of the Budget have been pointed out by my hon. Friend. I hope that the Minister will give the House categorical assurance that these extra costs imposed on local authorities by central Government will be fully met by an additional increase Order next year.

11.02 p.m.

Mr. George Younger: I hope that the House will not succumb to the most attractive argument of the hon. Member for West Stirlingshire (Mr. W. Baxter), who invited us to approve the

Order on the ground that all the things which would be paid for by the extra money were desirable. Of course they are desirable. I should be the last to deny that. But I ask him to reflect carefully on the full implication of what he said. If we allowed an Order to be passed through the House for everything which we considered desirable we should find ourselves rapidly in Queer Street financially. Our present problem arises from the fact that we cannot afford to go on spending more and more money on things, however desirable they may be, if we have not first earned that money.

Mr. W. Baxter: Is the hon. Member suggesting that we should deny the Minister the right to give extra money to Scottish local authorities? If so, will he point out the various items of the grant which he would like to cut?

Mr. Younger: If the hon. Member gives me a little more time I shall develop my argument. We must not approach the Order on the basis that if we think that the things being done are desirable, we should automatically grant the money. That is a fatal way of running the economy of the country. We ought to scrutinise with the greatest scepticism any request from the Government for extra money for matters which they have not foreseen.
I will back that with a further request to the Minister—and I hope that he will look particularly sympathetically at this argument. He knows only too well that all through the economy and all through private industry, every industry finds that it is made as difficult as possible for it to put up its prices when extra costs, out of its control, is imposed on it by the Government. The Minister of State, possibly rightly, was very critical of firms in the construction industry who said that they must raise their prices because of S.E.T. He was very niggardly with them and told them that they should not put up their prices. I agree with his desire. But they were doing nothing more than the Government are doing in the Order. They find that prices have rise in all departments, but all that the Government have to do is to print a piece of paper, to produce it to the House of Commons, and, if the argument of the hon. Member for West Stirling-shire were accepted, it would automatically be approved. It is a bit cool


for the Government to come sliding back each year saying, "We could not foresee this difficulty. We need this extra money."

Mr. James Hamilton: Is the hon. Gentleman saying that the Government should have foreseen the storm damage in Glasgow? If not, should not this extra money be provided?

Mr. Younger: Of course, and if the Minister told me that this additional money was to be spent solely for the repair of property damaged in the storm, I would troop into the Lobby with him, if necessary. But that is not the position. Many of the items to which this extra money relates could have been foreseen. That is why we must examine the matter so carefully.
In the last few years we have got used to interest rates rising higher and higher. I would have thought that this year, considering the circumstances, a ceiling would have been reached in interest charges. Does this mean that the rates charged last year are likely to be even higher next year? If so, this is serious because instead of seeking a reduction in interest rates, next year we will have an all-time record rate on top of an already all-time record one. Since Bank Rate has gone down by per cent., the interest rate should remain level, at least. For it to be going up is disturbing.
The increased costs of civil defence are equally disturbing. I urge the Minister to investigate the matter because I have the impression—although I admit that it is not backed by a detailed examination—that no effort has been made since the last reorganisation of civil defence about a year ago to cut down expenditure on this item at local authority level. Although I have not verified them, cases have been quoted to me of people spending their time with nothing to do in offices this past year and it is said that no check has been made to ensure that the economies which we were promised have occured. It seems astonishing that, despite the rundown of the last two or three years in civil defence, we should be expecting to spend more in the coming year on this item.
The question of transport costs has been raised. I cannot understand how the Government, with all the information which they must have at their disposal

about the increased costs that will result from the Transport Bill—I will not now argue how great those increases may be—can introduce a Rate Support Order making provision for an increase on only £15,000 to cover all the local authorities in Scotland. Even the most mild estimate of the Government must prove that the additional cost cannot be as little as that. I urge the Minister to re-examine this matter to ensure that he has not made a gross error.

Mr. G. Campbell: Items like the extra costs resulting from increased licence fees and fuel duty following the Budget can be estimated almost exactly.

Mr. Younger: Naturally, and if the Minister says that these reasonably concrete figures cannot be produced—although the Government must have the information—he will not get a sympathetic response if next year as asks for more money on the ground that these additional sums could not be foreseen.

Dr. Dickson Mabon: If the Transport Bill is defeated by the Opposition and, therefore, the compensatory grants in respect of fuel duty are lost, the arithmetic is easy. But I cannot foresee that. The Bill may be passed, in which case the increase will not be so large.

Mr. Younger: The hon. Gentleman is going into the realms of great complication on that. If he is seriously suggesting that it is on the cards that we shall be able to defeat parts of the Transport Bill, I should regard this as great encouragement to my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) and my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) who have been working so hard for so long to defeat the Bill, which is universally disliked throughout Scotland.
The hon. Member for West Stirlingshire referred to the extraordinary system on which we have worked for many years whereby expenditures of one sort and another have to be completed, met and finished by the end of the financial year, and if they are not, there can be no carry over. This has always seemed to me to be a built-in insurance of waste. Even the best run local authority cannot avoid incurring some waste in meeting this strange financial deadline. Has not the


Minister of State observed this in connection with the extra money that he brought forward for last winter for minor road works? The work has to be finished and the money spent by 31st March. All over Scotland at the moment one can see road works being rushed through on overtime at weekends. This money is being spent at a time when we are gravely short of money, and it is being done purely to get the minor works finished by 31st March so that they may qualify for his scheme.
I am trying to be helpful in putting this forward. I believe that an astonishing sum of money is wasted each year because of this strange deadline. The Government should look into it. This may be one way in which money can be saved.

11.13 p.m.

Mr. James Davidson: I welcome the increases in the grants. At the same time it is an indication of a growing feeling that the present rating system is becoming obsolete.
It is to meet the needs of local authorities, particularly those which have ambitious expansion programmes, that I again commend a new system based on rating on site valuation, which would be fairer and would encourage development—

Mr. Deputy Speaker: I am afraid that any such discussion would be outside the terms of the debate.

Mr. Davidson: I appreciate that, Mr. Deputy Speaker. I was just mentioning it in passing.
The burden of increased loan charges is becoming a very serious matter for local authorities. They are protected by subsidy on the capital cost of new housing, but they are not protected in other respects, particularly those already mentioned in the debate—the increased cost that may well arise from the Transport Bill, the increased fuel costs which will arise in running their vehicles and the additional vehicle Excise duties. These are among the extra costs which are not taken account of in the Order.
The pattern was set during the period of Labour Opposition of low rents. The discrepancy between English and Scottish local authority rents is very much greater

than the discrepancy between average wage levels, and the way of life of those who live in local authority housing has been shaped accordingly. There is need for a gradual readjustment towards rent schemes to fulfil the fair function of increasing standard rents and extending rent rebates to ensure that there is no hardship. In spite of the difficulties which local authorities are having in financing their new council houses—

Mr. Deputy Speaker: Housing subsidies do not come within the terms of this Order.

Mr. Davidson: The financial position is becoming a little desparate and local authorities throughout Scotland may well refuse to embark on new schemes.

Mr. Deputy Speaker: The hon. Member must understand that housing subsidies do not arise here at all.

Mr. Davidson: Under the terms of this Order, the largest single matter is the pay award for teachers and, having welcomed the Order on that ground, I should like to make one point. [Interruption.] I am keeping within order. May I finish the sentence? All I want to say is that there is a feeling that the awards are unfair in the sense that honours graduates are not getting a fair slice of this cake. There will be a decrease in the differential and I should like to ask if the Government see this as a positive discouragement to honours graduates to enter the teaching profession. We all know how much they are needed in teaching today, and I wonder if it is the intention of the Government to see that these graduates are driven to other professions—perhaps into industry—or even into other countries. Having said that, I appreciate the need for this additional sum of money.

Mr. G. Campbell: As the hon. Member says that he welcomes the need for these figures, I would point out that this Order can be made only because of the higher level of prices, costs, and remuneration. It is only because there have been such increases that we have the need for this Order which cannot extend the services.

Mr. Davidson: The hon. Gentleman has made a point. I accept that remuneration to teachers can be covered by this Order.

11.18 p.m.

Mr. Edward M. Taylor: This Order is unfortunate in two respects. First of all, the Order and the Report increase costs, but under Socialist Governments costs do increase at a very rapid rate and, therefore, we tend to get such Orders far more frequently than would normally be the case. Secondly, I always find that they are already out of date by the time that they are discussed in this House. The one before us is out of date and it is on that basis that I would like to put some specific questions.
First, how has the Minister computed the figures for transport? We know that the Government has a Bill before the House providing for substantial increases in transport costs, and there were two items which directly affected local authorities. These were, first, the abnormal load tax and, secondly, the wear and tear provisions. Where are these taxes? Were they included in this Order? They were certainly foreseen and the Minister knew what they were going to cost because local authorities and organisations sent in a great mass of detailed figures showing what these proposals would mean in £s.d., and how they would affect the hard-pressed ratepayers of Scotland.
If they were included, and the Minister accepted his responsibilities seriously, they should have been included; but then, of course, we had the amazing turnabout. In the face of fearless and reasoned opposition from the Conservative Party, the Government decided to scrap these two impositions. What we would like to know is whether the Government have decided to make some new provision. Will there be an amended Order, say, next week? The House is entitled to have some information about when we are going to consider the new arrangements consequent upon this sudden change. Where have these savage increases been included? If they have been taken out because of the Government's decision, will the Under-Secretary tell us if the Government intend to include the increased petrol tax, oil tax, and so on?
The Government are not to go ahead with the transport taxes which would clearly have discriminated against Scotland but instead have brought in tax increases which will bring in a larger

total from road users. Will this be included? Are we talking about a hypothetical Order which was already out of date when the Minister of Transport had her about turn and the Budget came forward?
If there is nothing else to be said for the Order, one splendid thing about this debate is that, for the first time for a long time, the hon. Member for West Stirlingshire (Mr. W. Baxter) is supporting the Government whole heartedly. It is a rare event.

Mr. W. Baxter: The hon. Member could not have been present on many occasions. On one or two occasions I have declined support for the Government, and I believe that this was the right thing to do, but on numerous occasions I have supported them.

Mr. Taylor: I will not go into that. The hon. Gentleman has disagreed with the Government. I wish he and his hon. Friends would do it more often.
Is this money to be distributed on the basis of the scheme drawn up after 1966? What discussions have taken place since then in relation to Glasgow? Glasgow has a special problem. It is in danger of committing economic suicide. Commercial firms are closing down. It is a desperately serious position. It was suggested that before this Order came forward and before further distributions were made we should have a measure to bring much needed relief to Glasgow. Will the Order be brought into effect on a new distribution formula, or is it being rushed through before that formula can come into effect? The Minister is under an obligation to say whether distribution will be under the old formula or the new one, which will favour Glasgow.
The items in the Order refer to unforeseen increases in prices and costs. Is the disaster which struck Glasgow and the West of Scotland included? That disaster was unforeseen. We could not anticipate it. But many of us have been concerned about the complacency shown by the Government about it. Bearing in mind that the disaster was unforeseen, the sums involved are considerable and that there is real hardship, have the Government taken the opportunity in this Order to make provision for the people of Glasgow and the West of Scotland and any other areas affected?
The Government have announced a £500,000 loan and that assistance will be given for local authority spending on their own homes. On items such as the maintenance of property, supplies and equipment, dealt with on page 6, I hope that the hon. Gentleman will be able to tell us whether provision is being made for this unforeseen development in Glasgow. It is about time that we had answers to these questions.
This is an appalling situation. We are discussing an Order which appears to be out of date already. This is no way to handle the affairs of State. Let us hope that the time will come when we get back to the stable and prosperous times which we had under the Conservative Government, when there will not be need for such Orders.

11.25 p.m.

Mr. George Lawson: I am somewhat surprised that we should have this Order tonight or any other night. When the Prime Minister made his statement when the House reassembled after the Christmas Recess, it was my understanding that he made it clear that any additional expenses would have to be met by local authorities. HANSARD for 16th January shows that the expenditure of local authorities had increased by some 46 per cent. over four years, not all of them Socialist years. After discussing this expenditure, the Prime Minister went on to say:
As regards 1968–69, the Government will expect local authorities to absorb any increase in costs which they cannot avoid by making savings elsewhere."—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1591.]
This Order surely represents an example of the pertinacity of the Secretary of State for Scotland in pressing that Scotland, in this respect, too, should be an exception. No doubt my hon. Friend the Minister of State will be able to say what was the excellent case put forward by the Secretary of State and what pressure he brought to bear in urging that these additions should be met from the central purse instead of by cutting services, the services which hon. Members opposite constantly ask to be increased.
My right hon. Friend the Chancellor of the Exchequer tonight spoke about organised humbug. It is humbuggery, if one can use that word, on the part of

hon. Members opposite regularly to cry out for improved and increased services. We can all remember their persistent shout about N.A.L.G.O. in Scotland not getting its increased payment. The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) spoke about special treatment for Glasgow, but he knows that once the total for Scotland has been decided, if Glasgow gets more, other areas get less. His hon. Friend the Member for Banff (Mr. Baker) will tell him that.

Mr. Baker: This amount is over the odds. I am asking for plain simple justice, not for more than our due.

Mr. Lawson: I accept what the hon. Gentleman says, but he should tell his hon. Friend the Member for Cathcart, who is demanding more for Glasgow. Hon. Members opposite are regularly crying out for more expenditure while ignoring the problem of who is to pay for it. For example, they call for more expenditure on the police force. It is seldom understood that the strength of the police force in Glasgow has increased by nearly 25 per cent. over ten years. I am not against having more and more police, but if we have more and more police, someone has to pay for them.

Sir John Gilmour: Is it not cheaper to spend money on the police than on keeping criminals in prison?

Mr. Lawson: Certainly, but one must spend the money on the police. We are not discussing prisons tonight. If we want these services, we must be prepared to spend the money required for them. It is part of the organised activity of hon. Members opposite to say that they want more and more public services, more and more school teachers. I do, but I am prepared to say that if we want more school teachers, they must be paid for. They demand secondary schools—in every area they demand an extension of these local authority services. When it comes to the question of paying the bill they come round the other way and say that this is a Socialist Administration.

Mr. Ian MacArthur: All that the hon. Gentleman has said shows the need for growth in the economy, of which there is no sign at all.

Mr. Deputy Speaker: Order. I cannot allow this debate to expand into a general


debate. We are concerned with whether these particular rate increases are desirable.

Mr. Lawson: I accept that, of course, although I must say that we have had the Transport Bill. What the Transport Bill has to do with this I do not know, but if it is in order then I am delighted to talk about it and how it will affect Scotland.

Mr. Younger: I may be able to help the hon. Gentleman. I do not think that he has quite understood that this Order refers to extra costs due to unforeseen increases which the Government have not foreseen.

Mr. Lawson: I started by telling hon. Gentlemen that there was nothing which compelled the central Government to meet those extra costs. I am not disputing them, but there is nothing compelling the Government to bring forward this Order. Local authorities were warned in January of this year that they would be expected to meet those extra costs themselves in some way or another. I see that there are some English Members present. One has always to discuss these things almost on tiptoe, because the tendency is to suggest that we are getting more than our due share. This is what some of my hon. Friends from English constituencies might argue, and I do not want them to start off after their respective Ministers demanding that there should be more payment in respect of English local authorities.
Today we have an example of something being done in the interests of Scotland, and yet some hon. Members opposite complain. How accurate are the words of the old wife—"Aye Girnin" ! I compliment my hon. Friend. It would be out of order to describe the apportionment of this grant. I am surprised that the hon. Member for Cathcart got away with it. We are discussing this grant and my right hon. Friend and my hon. Friend are to be complimented in that they have succeeded in wringing from the Treasury, despite all the pressures and difficulties generated over many years—pressures which have grown up under the guidance of hon. Gentlemen opposite—an excellent bargain.

11.34 p.m.

Mr. Ian MacArthur: The touching faith of the hon. Member for Motherwell (Mr. Lawson) in the Secretary of State will have impressed us ali. He is a very loyal Member of the party opposite, but he cannot expect us to accept all this eyewash. He has touched on a very important point, and I hope that the Minister of State will reply to it. What was the significance of the Prime Minister's statement in January? What effect will this have on local government expenditure over the next year, so far as it affects the rate support grant? Do these figures for 1968–69 mean anything? Have they been published in defiance of the Prime Minister's statement, or was that just another phantom cut, to which we have become accustomed?
I fear very much that we are largely debating a fiction tonight at this late hour. I cannot see how the 1968–69 column in Appendix I, and, indeed, elsewhere in the Appendix, bears any relationship to what will happen over the next year. If I have understood the figures correctly, Appendix II shows an estimated increase in cost for 1968–69 of £15,728,000 in total. The hon. Member for West Stirlingshire (Mr. W. Baxter) welcomed this. He represented it as a cornucopia of munificence pouring out of St. Andrew's House. It is nothing of the kind.
In Appendix 1, on the opposite page, we see how that £15,728,000 is broken down. The larger part of it is for pay awards. About one-quarter—£4½ million—is represented by other increases in cost. It is about those that I would like to ask the Minister some questions.
The first item is National Insurance contributions. Here we see a very substantial increase. At this point, I would like again to pose the question asked by some of my hon. Friends: to what extent do these figures for 1968–69 take account of the Budget and of the increases which have been announced in the costs which will fall on local authorities?
The Minister, in introducing this Measure, said that these were figures of increases that were unforeseeable a year ago. when the Report by the Secretary of State was published on 7th March,


however, there were unforeseeable increases ahead—those which we experienced last week in the Budget. Obviously, many of these increases in cost do not include the increases which will have to be met by the local authorities during the coming year.
In National Insurance contributions, the estimated increase has nearly doubled in the last year. Perhaps the Minister will tell us how this increase arises. Is it simply the increase in the cost of the stamp? Does it represent an increase in staff? If so, how large is the increase and what is the increased staff doing with its time? Does this make any allowance for the recent increase in the Selective Employment Tax? I presume that it does not. Since that is such a whacking increase, it must have a substantial effect on expenditure next year, but it cannot be allowed for in the figure which we are debating.
The increase in interest rates, which has already been commented on, reflects the Government's policy of high interest rates. I would like to know whether the increase for electricity includes last year's increase which came into being in defiance of the freeze in prices. Then comes the heading "Maintenance of property", in which there is also a substantial increase. Does this allow for last week's increase in the Selective Employment Tax, which bears so heavily on the construction industry, which will be responsible, in part at least, for this increase in the cost of maintaining property?
The next heading is "Fuel and heating". Does this make any allowance for the increase in gas charges which the Prices and Incomes Board forecast the day before the Budget last week? If not, why does it not make allowance for these latest increases in the price of fuel?
We next have the heading "Transport", about which my hon. Friends have asked questions. I hope that the Minister will answer them. We must know to what extent the swingeing increase in taxation on transport announced last week will affect these figures. The impact can be illustrated by the fact that it will now cost £459 to put a 10-ton lorry on the road before it is even used.
Those are some of the headings which show what an impact Government policy

has on local authorities in terms of increased costs which follow from the Budget and so many other Governmental declarations. Will it not really be much wiser for the hon. Gentleman to withdraw this Order and come back with another in a week or two's time when his officials have been able to work out what the figures will be? It is a waste of their time and ours, I suggest, to spend this time debating figures which are meaningless and asking questions about figures which bear no relation at all to what the figures next year will be. It would be helpful to us all and to the local authorities if the hon. Gentleman would withdraw this Order and come back with figures which bear some relationship to what is happening.
There are two other questions I should like to ask. One relates to civil defence, which the hon. Gentleman the Member for West Stirlingshire mentioned. I see that the cost of civil defence for next year is estimated at £1 million. That I fail to understand, I am not one of those who want to see civil defence diminished. I think it has an important rôle in defending our people, and we shall be discussing that on Thursday; but will the Minister of State tell us how it is that, in view of the Government's lamentable decision to cut down the civil defence force expenditure, £1 million still appears in the figures for next year?
Then, connected with that, is the figure for the fire pay award, showing an increase of the best part of £500,000 for 1968–69. Could the hon. Gentleman tell us if that makes any allowance for the bounty paid to the Auxiliary Fire Service in Scotland? Will he tell us what that amounts to? And what the saving will be a pretty miserable one, I believe—when the Auxiliary Fire Service is extinguished as from 1st April—another blow at the security of our country.
Finally, I would turn to a point made by my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) about costs to the local authorities of the terrible hurricane last January. If no allowance is made in these figures for that extra cost, I fail to understand how that can be. This paper was published on 7th March. Exactly a month before that this House debated the hurricane damage in Scotland. I remember well the Secretary of State assuring the


House of the sum of money to be made available to local authorities; it would not simply be £500,000, but additional grants which, I think he said, would run possibly to millions of pounds. That was in February. Why is there no reference to that in March? Or has the Secretary of State changed his mind? This would be an opportunity for the hon. Gentleman to make some statement about the gale damage and what the Government propose to do to help local authorities and those individuals who suffered so grievously at that time, and who are anxiously awaiting some statement from the Government, who have been silent about this for so long.
In short, I hope that I have shown that the figures are quite meaningless. I think it a waste of time for the Government to have produced them. These are guess figures. Almost every heading in the section on increased costs shows an increase now in the light of the Budget. It would be much more sensible and much more constructive if the hon. Gentleman were to scrap these miserable figures and bring us back new, revised, fresh figures next week or the week after.

11.44 p.m.

Dr. Dickson Mabon: With the permission of the House, I would like to reply to the points which have been made.
I can think of nothing more alarming to the local authorities than that I should seek to withdraw the Order. Anybody who has ever made such an order, or been concerned with the making of an order with the local authorities or the Local Government Finance Working Party knows that to reopen the Order for discussion would take a very considerable time. It would have to be done thoroughly, and a number of the complaints made tonight, one of which we heard earlier on from the hon. Member for Banff (Mr. Baker), would have to be discussed again.
Time is getting on, and we have already had to withdraw the Order for very good reasons to which I think no one objects, namely, increases in the remuneration of teachers. If I am wrong in thinking that, I will seek to defend these increases. If it is true that no one objects to them, that is the reason for the delay. But any more delay would embarrass the local authorities, and I do

not think that the hon. Member for Perth and East Perthshire (Mr. MacArthur) would really want to push me in the direction of seeking to withdraw the Order.
I join in the general idea that we have a ritual party dance about these increase orders from time to time. There has never been an occasion when either Government have failed to introduce one. The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) regards that as a matter of discredit. Since it is a discredit to this party, I presume that it is a discredit to his own, because right hon. and hon. Gentlemen opposite had to do it consistently.
The argument has been advanced that a large part of this Order is the result of awards which could not be quantified at the time of the original main Order. We have to take into account wage awards, and we cannot always guess how large they will be. Indeed, that is not a proper way of judging finance. Not only that, but there are other unforeseen costs which do not always arise because of Government intervention. It might be a case of changes in world markets or tariffs. Anyone who knows the work of the Mallaby Committee will know that the changing processes of managerial accountancy in local authorities are helping a great deal but are costing a great deal of money. It is not always realised how well local government is moving into the computerised age in administration, and we have to give credit there. Therefore, I do not suggest that we should withdraw the Order, or seek to review it at this stage.
A number of matters mentioned in the debate are not covered in the Order. I think that my best course, in view of the large number of questions asked, is to take them seriatim and deal briefly with each one.
The hon. Member for Moray and Nairn (Mr. G. Campbell) asked me to make an assessment which would be really hazarding a guess at the amount by which rates may rise in 1968–69. It would be a tremendous guess, because local authorities do not fix their rates for another six months. Even if we knew how costs would move and when, a great deal would depend on the size of the balances with which local authorities end the current year.
There is good sense in what my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) said about the psychology of the financial year. However, we did not invent it. It has been with us for a long time, and its only real opponent was Aneurin Bevan in his consistent arguments against the pastoral fiscal year, when he argued for longer periods such as quinquennia, and the rest.
It is not my position to try to defend the financial year tonight. It is the accepted practice. We could adjust the financial year to suit the English one or have the English adjust theirs to bring us more into line so that orders would be easier to compare, with negotiations carried out on a British and not a Scottish basis. But we could not give an estimate of that kind for the current year, not only because of our different financial years but because of the considerable time between now and the time when local treasurers make their assessment of their rates.
We encourage local authorities to try to ensure that they save as much as possible in a year to help them with the following year. In the case of the winter works programme, if a local authority has, in a sense, cheated by putting something into its programme which it genuinely considered that it could not do by 31st March, it is not only wasting Government money but local taxpayers' money. I would regret that. We have taken seriously each local authority's claim that it could do the work by 31st March. The winter works programme was designed to keep down unemployment, and it has been successful in its short-term objective. I thought that it would be welcomed. If any hon. Member believes that the system has been abused, I hope that he will report the matter to the Secretary of State and tell us which road is involved and which authority has been so mismanaging its affairs. I report that up to the moment we have received no complaint from Members of Parliament about any of these road works, but I am willing to examine any specific ones, including those hinted at by the hon. Member for Ayr (Mr. Younger).
I am appreciative, as I am sure Glasgow is, of the support of the hon. Mem

ber for Banff for the view taken by Glasgow at the meeting we had in Glasgow when we were discussing the Order. Some cynics might say in passing that the hon. Gentleman is supporting the view taken by Glasgow because, by a side wind, one or two other authorities get an advantage. That has never crossed my mind. It is a possibility only in the minds of others, such as the hon. Member for Cathcart, who, I see, is nodding assent.
What has been agreed in the Local Government Finance Committee and what has been accepted by the Secretary of State—I am not saying that he necessarily was of the view that this was a wise decision, but he accepts it, because he genuinely consults local authorities—is that we should be prepared to leave it to the Working Party to discuss the basis of the new formula in the new Order which you, Mr. Deputy Speaker, will be allowing us to debate at a later stage.

Mr. Deputy Speaker: Order. I do not not think that the Minister should pursue that tonight.

Dr. Mabon: I have no intention of doing so, Mr. Deputy Speaker. I merely wanted to touch on it in passing, as others have.
The hon. Member for Ayr spoke about our letting prices rise through incompetence. I have said that a large part of these increased costs are accounted for by increased remuneration.
It is estimated that civil defence in 1968–69 will be cut by £0·7 million from a total budget of £1·6 million. That is a substantial cut. Whether it is good or bad it is not for me to debate at the moment. The fact is that in these estimates it is a cut. There will be an even further cut in 1969–70 which has not yet been calculated fully. As for 1967–68, the hon. Gentleman would not have expected swingeing cuts to be made until the full results of the home defence review had been worked out.

Mr. MacArthur: I am grateful to the Minister of State for giving this information. I think he said that the estimate for 1968–69 was £1·6 million. I ask that, because I have it here as £1·03 million. I do not want to quibble, but it is important to get the figures right.

Dr. Mabon: I will not go into it all just now. The hon. Gentleman can take it from me that the total budget is £1·6 million and that we are recording in 1968–69 a cut of £0·7 million. I cannot quantify the cut in the succeeding year.

Mr. W. Baxter: Surely that is a contradiction of the Chancellor's decision, which was agreed to on a vote a matter of two hours ago, that civil defence would be cut out entirely.

Dr. Mabon: We cannot just remove an item from the return as quickly as that. It is a matter of running down the system.

Mr. Younger: Will the hon. Gentleman give way?

Dr. Mabon: No; I will not give way now, because I want to finish dealing with this point. We cannot make an assessment for the position in 1969–70. My hon. Friend the Member for West Stirlingshire suggests to me that it should be nil. I cannot say that, because I do now know all the facts. In any case, I am surprised at you, Mr. Deputy Speaker, for allowing me to debate a financial year which is not within the Increase Order. I am willing to debate this when the main Order comes before the House. It may be that the desire of my hon. Friend the Member for West Stirling-shire will then be met.
The hon. Member for Ayr asked if the figure in relation to interest rates meant that interest rates would go even higher. The answer is, "No". It means that the average loan fund interest rates rose from 5.94 per cent. in 1966–67 to an estimated—I stress that—6·47 per cent. in 1967–68. That is all that is allowed for in the Order, but average rates may rise further in 1968–69 even if current rates, as we saw last week, for new borrowing go down in future, as everyone hopes they will. Many of these calculations are made in retrospect, and the consequences of past years, and these are merely the arithmetical records of what has been, rather than what is to be.
My hon. Friend the Member for West Stirlingshire asked about the carry over. I think that I have dealt with this. We encourage local authorities not to regard the financial year as sacrosanct, and one which they should finish off with a great

splash, although I exempt the imposition of the winter roads programme, because the Government put a date on that and expected people to play fair by it.
I cannot talk about the matters raised by the Member for Aberdeenshire, West (Mr. James Davidson), because I do not want to get into trouble, as he did, but in relation to teachers' salaries I acknowledge that we have set up a new system by the Remuneration of Teachers (Scotland) Act, 1967. The distribution of a salaries settlement is in the hands of the Salaries Committee, and the Secretary of State is bound by any recommendation it makes. A recommendation, as we know from the legislation, can be made only if the management and teachers' sides are in agreement. I agree that under the present agreement honours graduates get the smallest increase, but this is not a point for Ministers. This was the merit of the scheme, and I thought that the Opposition, both the Conservative Opposition and the Liberal Opposition, accepted the idea of trying to have this kind of settlement outwith, although not divorced from, direct Ministerial control. That being the case, one must accept the penalty that the settlements are perhaps not all that we would like, either as individuals or as Ministers, although I reserve the Secretary of State's position on that.
I turn, now, to deal with the question of storm damage.

Mr. G. Campbell: I hope that in the short time available the Minister will say something about the question of transport costs, and what is entailed in this Order under that heading.

Dr. Mabon: The hon. Gentleman is being impatient, because I have a lot to deal with, and I think that I ought to deal with the important matters first.
With regard to storm damage, there has been a great deal of misunderstanding about this, and it seems to be persisting. The rate support grant is distributed to authorities on a weighted population basis, and it does not cover expenditure on housing revenue account. I confess that a lot of damage has been done to more than houses, but the principal sector of damage is housing, and therefore it will be revealed in the housing revenue account. We have encouraged local authorities to go ahead irrespective of the


position of the housing revenue account, and we will look at it in its own time.
The damage is not distributed equally throughout Scotland. It is unevenly spread, and even among authorities in central Scotland—and they are the ones who are affected by this—there is a maldistribution, or a lack of homogeneity in the way in which the damage has struck. This is why the Secretary of State has decided, and said so in the debate some time ago, that he will deal with storm damage by means of special direct grants to those authorities concerned. If we had announced a grant on the basis of the first estimates, we would have been wrong, and we would justly have incurred a great deal of criticism. Even the estimates today are rising, and it will not be in the interests of the authorities concerned to offer them a settlement grant now. The local authorities accept this, and anyone who seeks to champion them in this House and claim that there should be a settlement now is acting against the interests of the authorities concerned. I am having a meeting in Glasgow on Friday, when we can discuss the matter further.
I reject the charge of complacency, either on the part of Ministers, or on the part of local authority officials. In fact, we not only reject it, but resent it. A great deal of hard work has been done, and remains to be done, to deal with what has been a major disaster for Scotland, and has been declared so by the Prime Minister ever since the day of the calamity. We will no doubt come to a final settlement at some future date. I am sorry that for the moment the Conservative Party has deserted the excellent position its Leader took in the debate in the House some weeks ago.

Mr. Hector Monro: The Minister is giving the wrong impression. What the people of Scotland are concerned about is not the lack of action behind the scenes, but the fact that the Minister is not telling us openly what is happening.

Dr. Mabon: I have tried many times to explain exactly what is happening in this regard. Compensation to Scotland is in millions of pounds, but it would be wrong to quantify it at this stage, because we do not have a final bill. The damage earlier this month has added to the bill.

This must be included in the bill and we must therefore wait until we can see what the final bill will be. We find it under different headings—agriculture, horticulture, roads, in some cases sewers, housing, schools, and hospitals. In due course we will present Parliament with a final reckoning and accounting of how much this terrible calamity has cost the nation as well as Scotland.
I turn now to the Transport Bill. Many exaggerated estimates have been made, as Ministers know from the correspondence that they have received. The only factual evidence that has been worth while has been sent to the Scottish Economic Planning Council at the request of the Transport Committee of that Council, and that obtained from questions from Ministers to organisations that we have met.
Many estimates have been made, and we have tried to explain what each one means. I have said on several occasions what the "wear and tear" tax would cost the consignor. It would be less than 1 per cent. That is not a guess: that is an assessment made by the best methods we have and the best persons we have, based on figures we have had supplied to us by the road licensing authorities and those in the business.
I do not deny the right to fight these revenue raisers; that is natural. But it is wrong to misrepresent them or to exaggerate them, although hon. Members opposite, I suppose, are entitled to do that in seeking to defeat the Bill. But the Bill brings advantages to local authorities in respect of the subsidisation of fuel costs, bus grants, and the rest. That has been completely ignored. The estimates have, however, been made by thte Local Government Working Party. When we come to the later years and the review of the year 1968–69 we shall see how matters stand.

Mr. Younger: The hon. Member would not wish to leave the wrong impression. I am sure that he did not mean to say that the road haulage industry had agreed that the increase in cost has been only 1 per cent. He may have used some of the industry's figures, but I am sure that he was not meaning to say that the industry agreed with his figure of 1 per cent.

Dr. Mabon: I know that the road haulage industry does not agree with that figure. I have never known the construction industry, or any other industry, to agree in similar circumstances. What we can agree on are the facts about the number of vehicles and the increase in revenue. Then there is the argument about projecting that as a burden on the consignors. Tonight we are speaking of consignors as local authorities. I think that, with respect, and without trying the patience of the House any more, I have answered all the points put to me.

Question put and agreed to.

Resolved,
That the Rate Support Grant (Increase) Scotland) Order 1968, dated 4th March, 1968, a copy of which was laid before this House on 7th March, be approved.

BOOTLE (EXTENSION) ORDER

12.4 a.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington): I beg to move,
That the Bootle (Extension) Order, 1968, dated 27th February, 1968, a copy of which was laid before this House on 5th March, be approved.
Before I come to the Order, I think that I shall be in order if I briefly say that this proposal comes within the terms of the statement made by my right hon. Friend on 3rd May, 1967, in which he said that in view of the appointment of the Royal Commission, it was not normally proposed to go ahead with further changes in local government reorganisation unless there were some specially urgent requirement—as was the case in respect of one or two of the major Orders that we have debated recently—or there was an amalgamation or an alteration of boundaries which came forward under Part VI of the Local Government Act, 1933, as amended by the Local Government Act, 1958. That is an alteration of boundaries on the initiative of the local authority. In such cases, where there is no dispute, there is a great case for going ahead if possible.
The Order would extend the boundaries of the county borough to include the adjacent area of 276 acres in the West Lancashire Rural District. The case for it is very strong. Not only is

it not opposed, but 260 of those acres are already owned by the Bootle Corporation, which has acquired the land to meet the desperate shortage of housing land within its existing boundaries. It is thought that it will provide land for about 3,000 housing units, both corporation and private enterprise, which will greatly comfort my hon. Friend the Member for Bootle (Mr. Simon Mahon).
I am not saying that even this acquisition will solve all the area's problems. As the hon. Member for Crosby (Mr. Graham Page) knows, all the authorities in the area are seeking land for housing. This is a big problem which will take time to solve, but this is a step in the right direction. If this land is acquired for this necessary and desirable extension, it is obviously convenient that the local authority services in the area should also be provided by the Corporation, which has a good record, rather than fragmented and provided by the county council or the rural district council.
The usual arrangements for the transfer to the corporation are therefore made. The land is already largely owned by the corporation and many of those who will live there will be corporation tenants, so it seems sensible that it should provide and administer the services.
The extension has made it necessary for the Home Office to provide for a re-warding. An inquiry was held and proposals were finally agreed which will come into effect in the time specified in the Order. The other features common to Orders of this kind are to be found in this one. I hope the House will think that this is a wise and sensible move and will approve the Motion.

12.7 a.m.

Mr. Graham Page: I am sorry that I was late in getting to my feet, but I thought that the hon. Member for Bootle (Mr. Simon Mahon) was rising, since the Order affects his constituency, but no doubt he will have his opportunity later.
As a Member for a nearly adjoining constituency—it does not quite touch Bootle—I wondered why the Parliamentary Secretary, should have said that neighbouring authorities had been consulted. The map with the Order shows the extraordinary situation along the northeast Crosby, Litherland and Bootle, which


has come about through the local authorities purchasing land for development and then making various orders absorbing it. I call particular notice to the boundary of the Crosby Borough Council, which carves up streets and even buildings in a peculiar shape.
In that respect, it is a little unhappy that the Order is brought forward in rather a piecemeal fashion. There is a tremendous demand by the local authorities in the area for land, particularly for housing and educational purposes. There has been a gradual encroachment on the area of the West Lancashire Rural District Council, nibbling into that area bit by bit. I had hoped that there would be a more combined effort to decide which local authority should have which areas of land within the West Lancashire Rural District. Litherland U.D.C., for example, is starved of land for housing development. Apart from clearance areas, I know of no land remaining to Litherland U.D.C. for housing development, and the Council seems now to have been prevented from having any further part of the West Lancashire area. This is rather a piecemeal effort. There might have been a complete revision of the boundaries to satisfy all the local authorities concerned.
What is the position over the local elections which may take place in the next month? Does the Order apply to those local elections? Will it come into operation right away so that the local elections will be affected and the area will be within Bootle Borough Council for the coming elections? I find it sad when a county borough takes over part of a rural district in that the parish councils disappear. That is the general law, but we lose a very useful contact between local government and the electorate when we lose the parish councils. Perhaps some day we may have ward councils instead in the urban areas.
I cannot complain that the Order follows the general law, but I do complain that the Order deals only with a very small part of a very large problem—the land needed for housing in this area. It solves only a little of the problem. Indeed, I do not know whether it solves even that, because it will provide only 3,000 houses for Bootle, and Bootle is expanding more rapidly than that. Crosby

and Litherland are expanding, their housing waiting lists are very long and they can see no prospect of any fresh land on which building can take place. I congratulate Bootle on this Order and I wish that I could be as happy about the adjoining areas.

12.14 a.m.

Mr. Simon Mahon: At this late hour of the night, may I express my gratitude to the Parliamentary Secretary for the manner in which he has dealt with the subject and for the generosity of himself and his right hon. Friend towards the county borough of Bootle. I am also grateful to the hon. Member for Crosby (Mr. Graham Page), who spoke from the Opposition Front Bench.
I do not much like the word "encroachment" which has been used many times by those talking about the endeavours of the Bootle County Council. We make these demands—if we may call them "demands" by the most generous application of that term—because we have such grave difficulty.
The hon. Member for Crosby spoke about the difficulties of housing and so on. It might put the matter in perspective if I explain that a well-known former official of the Ministry of Housing and Local Government—I understand that he recently retired—told me some time ago about what Bootle went through during the war. This man, who has great knowledge of these matters, particularly from the point of view of the north of England, pointed out that Bootle was bombed so viciously by the German air force—comparatively speaking, it was bombed more harshly than any other part of the country—that it was completely written off.
He was able to tell me that by 1967 Bootle had achieved what could only be described as a social miracle. I am glad that the present Town Clerk of Bootle, Mr. Taylor, is listening to the debate. As the representative of Bootle, I am glad of this opportunity to express the gratitude of my constituents for the help Bootle has received over the years. We are grateful for the additional land that is being made available, just as we were grateful for the earlier extension in 1951, as is exemplified in the memorandum supplied to hon. Members.
I recall that when I was chairman of the local housing committee the medical officer of health for Bootle told me that right after the war the area had the highest infant mortality rate, highest maternity death rate and highest incidence of T.B. since the town was established, the highest in the British Isles. I am glad to say that everything has changed and that the opposite is now the case. Those adverse social statistics have been reduced over the years, and now they are below the national average. These additional 276 acres of land will enable us to go further, although they will not, of course, solve our problems. We will require another big advance into territory before all our social demands are met. Nevertheless, this extension represents a considerable advance for a town the size of Bootle.
We are grateful for what has been done and to those who have made this progress possible. There has been agreement with all our neighbours about this step and we are grateful to them, including Crosby, Litherland, Liverpool and West Lancashire. All have seen the need for this social advance. My hon. Friend referred to the excellent record of Bootle Council. New industries and schools are being established. The Council and those who administer it are as good as one could find anywhere in Britain. The efforts of those who have served on the Council and of those who are now serving on it—and I am glad that Mr. Taylor is listening to me say this—enable me to say that, by wise application, good local government and by the judicious and proper use of land, Bootle has been able to advance the position of its people so that the town compares favourably with any other part of the country.
The Council, the Town Clerk and his officials have used the available land so well that now some of it is being used for massive industrial development, like the giro scheme in Bootle. The face of the town has been changed. We are grateful to all concerned, including the Government and Ministers, for giving us such generous treatment both in the past and today.

12.19 a.m.

Mr. Skeffington: With the leave of the House, I will briefly answer some of the points that have been raised.
Hon. Members will have listened with interest to what has been said about the vigour, drive and imagination of Bootle. I notice on page 5 of the memorandum, which was originally produced by the borough, that Bootle has taken pride in the fact
…that throughout the present century the birth rate for the Borough has been consistently above the average for England and Wales, while, since 1952, the death rate has been below the national average.
That gives a satisfactory picture of the position, and this additional land will give new opportunities for those who are setting up home and who are on the housing waiting list. I echo the praise given by my hon. Friend the Member for Bootle (Mr. Simon Mahon) to those who administer the borough.
The hon. Member for Crosby (Mr. Graham Page) raised three points. I have great sympathy with all of them. He referred to the most peculiar boundaries. If he looks at the major map he will find that it is at least satisfactory that the proposed extension shows that the boundary is a rather better one, following the Liverpool outer ring road. This is a step in the right direction. The curious configuration is due to the fact that the authorities have been trying to obtain additional land. I agree with the hon. Member; I should have preferred a strategic designation of the orders, which ought to have been made many years ago, rather than this kind of ad hoc arrangement where authorities, by one means or another, try to meet their housing requirements. They are bound to do this under the law because they have to be housing authorities. I hope that under the new Town and Country Planning Bill—about which the hon. Gentleman and I know almost too much—the new system will enable some of this forward thinking to emerge in the consideration of the various strategic plans and ensure that this kind of ad hoc arrangement will not be such a typical part of the local government scene in the future as it has been.
The hon. Gentleman also mentioned the question of the disappearance of parishes. I regret this. However, in this case only part of the two parishes will disappear and there will be a parish council remaining in the other parts.
With regard to elections, paragraph 1 of Article 7 sets out the arrangements,


and the elections on 13th May will be fought under them. The arrangements between 1st April and 13th May are outlined in the Article.

Question put and agreed to.

Resolved,
That the Bootle (Extension) Order, 1968, dated 27th February 1968, a copy of which was laid before this House on 5th March, be approved.

MARKET DEVELOPMENT SCHEME

12.23 a.m.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): I beg to move,
That the Market Development Scheme (Extension of Period) Order 1968, a copy of which was laid before this House on 28th February, be approved.
The Market Development Scheme was introduced in 1962 for three years. When that period ended in 1965 it was extended for another three years—I think I was at this Despatch Box to extend it—until the end of March 1968. The Statutory Instrument now before the House will give the Scheme a further extension up till 31st March, 1971.
Subject to Ministerial approval of grants, the Scheme is run by the farmers unions. It is known by its initials A.M.D.E.C.—the Agricultural Market Development Executive Committee, which the unions set up to nin the Scheme. That Committee is responsible for considering all applications for grants, and it is only on its recommendation that grants are made. Throughout the period of the Scheme this arrangement has worked well and has made it possible for leading figures in the industry to bring their judgment and experience to bear on the tremendous variety of proposals put forward for assistance under the Scheme.
On the recommendations of A.M.D.E.C. grants have now been made in more than 260 cases ranging over a tremendous variety of projects such as market research of various degrees of complexity, quality improvement, produce storage, increased efficiency in handling and transport and performance testing of livestock. The projects have been both large and small, and the grants have varied from 25 to 75 per cent., and in a

few special cases have been up to 90 per cent. The amount of grant paid or due to be paid on projects approved or expected to have been approved by the end of March is nearly £1·2 million.
An important feature of the Scheme has always been that the results of projects should be made generally available to producers and others by means of reports prepared by the recipients of grants. The outcome has been the publication of much interesting and very informative material.
About half the amount of grant which has been paid has been used to assist developments in co-operative marketing by producers, particularly in the field of livestock. The House will recall that the Agriculture Act, 1967, provided for a new scheme of grants for co-operative activities and for the establishment of a Central Council for Agricultural and Horticultural Co-operation.
This new Scheme, which came into operation on 3rd October last, incorporates the several types of grant which had previously been available for the promotion and development of co-operation, including A.M.D.E.C. grants. The effect on A.M.D.E.C. has been to divert part of their work to the Central Council and to make it necessary to consider the future of the Market Development Scheme in these changed circumstances. The Secretary of State and my right hon. Friend are persuaded, therefore, that there remains an important role for A.M.D.E.C. to play, and we consider that the Scheme should continue for a further three years as a means of encouraging developments in marketing, other than those concerned with stimulating co-operation between producers. To cover this additional period, we propose that the ceiling for the grants should be raised from the present level of £1½ millions—of which £1,200,000 has been taken up—to £2 millions.
I am glad to be able to tell the House that our views are shared by the farmers' unions. Because A.M.D.E.C. is unlikely to have quite as much work to do in the future, the unions have decided to reconstitute the Committee as a smaller body. I also understand from the unions that the Chairman of A.M.D.E.C., who, as the House will know, is Lord Nugent of Guildford, has decided that, after six years of office, it is time to stand down. It is particularly fitting, therefore—and I


am sure that I carry the whole House with me in this—that I should take this opportunity to pay tribute to the outstanding contribution which Dick Nugent and his Committee have made to the success of this Scheme. It is a scheme which is unusual in its methods of administration and in the wide range of projects coming within its terms of reference and we are all greatly indebted to Lord Nugent and to his Committee, as well as to their small secretariat for the hard work which has been put in and for the efficient way in which their duties have been discharged.
The farmers' unions have proposed that the new Chairman should be Mr. John Jenkins, who has been a member of the Committee since its inception and who, I think, is well known to those hon. Members of this House who have a particular interest in agricultural matters. I am glad to be able to tell the House that the proposal that Mr. Jenkins should be appointed has been agreed. I hope, therefore, that this Statutory Instrument extending the Scheme for a further three years will meet with the approval of the House.

12.29 a.m.

Mr. Bryant Godman Irvine: On this side of the House we want to associate ourselves with the generous tribute which has just been paid to Lord Nugent of Guildford and those who have served with him on A.M.D.E.C. We also welcome most heartily the new Chairman and wish success to the work which he and the Committee will undertake. We would also at this time offer our felicitations to the Central Council and the work which it, in turn, will undertake. At the same time, we are grateful to the N.F.U. for the support, financial and in other ways, given to these schemes. I have only two points to put to the Parliamentary Secretary.
If one looks at the Statutory Instrument to find out what it is that A.M.D.E.C. will be doing in the future, one finds that it is really necessary to read paragraph 60 of this year's Price Review—the Annual Review of Determination of Guarantees—and there, under the heading of "Market Development Scheme ", in paragraph 60 see that
…this scheme will be extended for another three years from 1st April, 1968, to

assist marketing developments other than those of a co-operative nature".
It is not immediately apparent, however, from what the Parliamentary Secretary has told us tonight, or from the Price Review, what is the logic of the organisation. I would ask, why one organisation to assist marketing developments of a co-operative nature, and another for
marketing developments other than those of a co-operative nature"?
Why does the Parliamentary Secretary think that two organisations are necessary and why have suggestions to the contrary put to him been rejected?
The second point arises from the Order which, in paragraph 2, says that approvals may be given under Section 9 of the Agriculture (Miscellaneous Provisions) Act, 1963, and then sets out what they are. Among other things, Section 9 provides that the Treasury may
…make provision for the payment of grants towards the cost of carrying out proposals for promoting the efficient marketing of agricultural or horticultural produce, for carrying out research connected therewith, for making real results of such research available to producers of such produce, or for the formation of bodies carrying on agricultural or horticultural producers' marketing businesses.
Since the Committee was set up, at least 20 new co-operatives have been brought into being. None of them has fallen upon evil times. They have all been successful. Some of them are expressing some doubt as to how the new organisation will work under this Statutory Instrument.
They feel that they are not in any way associated in contractual relationships, that the residual powers of A.M.D.E.C. might well have been applied to them in questions of research and development and, in particular that the provisions of Section 9 would be available in a way which they might not be under the new arrangements. One of the ways in particular in which they feel this might apply would be in providing market intelligence research and other methods by which they would be able to co-operate better for their common interest. I hope that the hon. Gentleman will be able to deal with these two points. We on this side give our support to this Statutory Instrument.

12.33 a.m.

Mr. Mackie: With permission, perhaps I might reply to the hon. Gentleman the


Member for Rye (Mr. Bryant Godman Irvine). The two points he raised are basically the same. I can see that the two organisations could perhaps have been combined. However, both organisations will operate in the same building. Mr. Jenkins is also Deputy Chairman of the new Central Council. The Committee was operating while the Bill was going through the House, and it and the new Council will co-operate. The Council does not have anything to do with development. We felt that it would be as well, since it would not cost any more, and since some of the staff and the Chairman are common to both organisations, that we should let the Committee go on for the next three years, working in cooperation with the new Council.
Although, on the face of it, the arrangement appears clumsy, it will not be so in practice. There will be close liaison. I hope that the co-operatives mentioned by the hon. Gentleman, which have been a great success, will agree that they will get the liaison required.

Mr. Bryant Godman Irvine: rose—

Mr. Speaker: Order. The hon. Gentleman has exhausted his right to speak, but he may intervene.

Mr. Bryant Godman Irvine: I am obliged, Mr. Speaker. Will the hon. Gentleman deal with the anxiety expressed by the co-operative movement as to the way this will work in future?

Mr. Mackie: We have not had such anxieties expressed to us, but I am certain that there will be close liaison between the two bodies.

Question put and agreed to.

Resolved,
That the Market Development Scheme (Extension of Period) Order 1968, a copy of which was laid before this House on 28th February, be approved.

NEW TOWNS (SCOTLAND) BILL [Lords]

Order for Second Reading read.

Motion made, and Question proposed, That the Bill be now read a Second time.—[Dr. Dickson Mabon.]

12.35 a.m.

Mr. Graham Page: As an English Member I hesitate to trespass into Scottish legislation and to do so slight critically, but as a Consolidation Bill this does not seem to make much progress towards a reduction in the number of Statutes on the Statute Book. It divides one Statute dealing with Scottish and English law into two separate Statutes, but that is not reducing the volume of the Statute Book.
In a number of places the Schedule refers to the repeal of the whole Act and the reader may think that that is a rather formidable thing to do, but in fact it means not the repeal of the whole Act but only as it applies to Scotland. This is a process of consolidation which is rather unimaginative, and I hope that in future we shall be able to provide consolidation Bills with a rather better structure, making it easier for them to be amended as the law is amended and kept up to date. If we continue dividing English and Scottish Acts into two, we shall only increase and not reduce the number of Acts on the Statute Book.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Dr. Dickson Mabon.]

Committee this day.

LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL

Order for Second Reading read.

Motion made, and Question put (pursuant to Standing Order No. 62 (Public Bills relating exclusively to Scotland)).

That the Bill be committed to the Scottish Standing Committee.—[Dr. Dickson Mabon.]

Question agreed to.

Bill (deemed to have been read a Second time) committed to the Scottish Standing Committee.

DRAUGHTSMEN, GLENROTHES (PAY)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]

12.37 a.m.

Mr. William Hamilton: Beckman Instruments Ltd. is an American firm with a factory in the new two town of Glenrothes in Fife. It has rather less than 600 employees, mostly women. Partly as a consequence of that, trade union organisation is either weak or nonexistent. But one union, the Draughtsmen's and Allied Technicians' Association, has won recognition. On 7th September, it reached agreement with the company, after three tries, on a new wage scale affecting, I think, 15 draughtsmen, agreement on a scale recognising the new D.A.T.A. minimum rates. I am advised by the D.A.T.A. representatives who came to see me that this increase was negotiated after three attempts to secure agreement with the management.
Since the increases were subject to submission to the National Board for Prices and Incomes, the firm quite properly notified the Ministry of Labour on 8th September, the day after the agreement was reached. On 18th September, the Ministry replied stating that the Board's report on the engineering industry was expected in November and asking Beckman's to withhold payment pending publication of that report.
On 4th October Beckman's replied to the Ministry, justifying the increase on grounds of increased productivity, a commendable course of action. The figures which the firm supplied to me in a letter dated 29th February show an increase of 35 per cent. in sales compared with the previous year, with only a 23.8 per cent. increase in engineering expenditure, which included draughtsmen. In a letter which I received from the divisional organiser of D.A.T.A., dated 22nd March it said:
The firm agrees that there has been an increase of 18½ per cent. in drawings per man per year, and that the average time per drawing has been reduced from 11 hours to nine hours since July 1967.
With those facts in mind the firm had committed itself to implement the negotiated increase on 1st December last year.

It so advised the Minister of Labour in the letter dated 4th October. On 19th October the Minister replied, saying that the Government were unable to reach a decision on the agreement until the Prices and Incomes Board had reported on the engineering industry. That was followed by a further letter from Beckman dated 2nd November, reiterating its intention to pay out on 1st December, as it had promised, unless the Government took legislative steps to protect the company against default. Failing that kind of protection, the firm went ahead and the agreement became effective on 1st December.
Details of the agreement were given to the Ministry of Labour on 8th December and the Prices and Incomes Board's report on engineering was published in mid-December. To recapitulate, two months after the firm had started paying the increases, and six weeks after the report of the Prices and Incomes Board was published, the Ministry of Labour wrote to Beckman telling it that in view of the report it should reconsider and revise the agreement. It was only at that point that reference was made to Part II of the Prices and Incomes Act.
The firm was told that if it did not act voluntarily, then a direction to suspend payment would be issued. Subsequently I understand that there were a lot of comings and goings, telephone calls, letters and visits, back and forth to London. Finally on 20th February, five and a half months after the agreement had been first reported, a direction was imposed by the Minister, suspending payment of increases—not asking for the money already paid to be taken back I understand. I am surprised that the Minister doubted the figure which I gave in my supplementary question to him on 11th March. Such delays as this seem to me to be completely incomprehensible and indefensible. It is simply not good enough to leave a firm in that kind of state of suspended animation waiting for some report at some date which might make recommendations either acceptable or unacceptable to the Government.
What was all the row about? I understand that the total increases to all the men involved amounted to quite a bit less than £20 a week. I understand that two of the men were to get £5 a week


extra. One or two were to get 10s. and some would get nothing.
What kind of men are we talking about? I have been advised that one of them has a Higher National Certificate in chemical engineering. Two have higher national certificates in mechanical engineering. Seven have ordinary national certificates in electrical engineering and one has a City and Guilds certificate in mechanical engineering. We are, therefore, talking about men whom we want to keep and encourage, men with valuable qualifications in the kind of scientific exporting industry which we so desperately need to cherish, and particularly in Scotland.
I should add another point. I received this morning a letter from the Press and public relations adviser of the Prices and Incomes Board, a Mr. Bernard Ingham. It refers to some comments which I made on the visit to Beckman's of two Board officials on, I think, 29th February. I am not responsible for any gloss which the Press may put on my comments on this or any other matter.
I am not hiding behind anything which has been said or not said, but the opinions which I then stated on the qualifications of the two gentlemen concerned were given to me by the trade union representatives who came to see me. I am repeating what they, the D.A.T.A. representatives, said to me and I apologise to them if I did any of them an injustice. That is a relatively minor point.
I understand that representatives from D.A.T.A. and from Beckman's are to meet the Prices and Incomes Board on 9th April and to that extent, I suppose, the issue is sub judice, but I want to make a final point on the general issue. As my hon. Friend the Joint Parliamentary Secretary probably knows, I am in general agreement with the principle of a productivity, prices and incomes policy. Many hon. Members and people outside this House are inclined to forget the productivity side of it.
Let me, however, add in parenthesis that I was not the slightest bit impressed with the "dog's breakfast" served up as such a policy by the Secretary of State for Economic Affairs last Thursday. It seems to me that if we are to get this kind of policy accepted by trade unions

and by the country, it must be fair, sensible, workable and flexible, and it must provide incentives or rewards to greater efficiency and greater productivity. Because this claim does not do those things, I object very much to the Prices and Incomes Board and the Ministry of Labour interfering with an agreement which has been freely negotiated by the firm and by the trade union concerned.

12.50 a.m.

The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Roy Hattersley): Like my hon. Friend the Member for Fife, West (Mr. William Hamilton), I think it will be necessary for me to go step by step through the details of what is a complicated issue. Before I do that, disagreeing with him on one or two matters of fact, I think it is important that I should put the matter in general perspective.
The general perspective must begin with a statement of what my right hon. Friend the Secretary of State is doing when he asks the Prices and Incomes Board to make a judgment about this and other agreements between D.A.T.A. and specific employers. I should make it clear at the outset that that does not mean that the Government have passed a judgment on the propriety of an agreement—whether or not it is within the terms of the prices and incomes policy. Indeed, the agreements have been referred to the Prices and Incomes Board in order that advice about their propriety can be obtained, and I repeat that nothing I say or that the Government says should be thought to cloud the issue or prejudice the eventual judgment whether what an agreement does or says conforms with the prices and incomes policy. It could well be that this specific agreement or others referred to the Board turns out to be in conformity with the prices and incomes policy; it might be that a part of one of them turns out to be in conformity with the prices and incomes policy. If that is the case the Government are bound by the Prices and Incomes Act immediately to allow the implementation either of all of the agreement or of part of the agreement, depending on whether all or part of it is judged by the Prices and Incomes Board to be acceptable within the terms of the policy laid down by the Government in Cmnd. 3235.
Reference of this agreement, or for that matter any other agreement or claim to the Board, implies one of three things, First, that there is an issue of general principle or general application. Second, the agreement, if implemented, might have repercussions on other claims or agreements. Third, that there is a possible but by no means certain breach of the prices and incomes policy.
I think that if, like my hon. Friend, I go through the stages of this agreement step by step he will agree and the House will agree that by these criteria my right hon. Friend was right to ask the Prices and Incomes Board to look at this agreement.
Of course, my hon. Friend is right in saying that the agreement affected only 15 draughtsmen, but to my mind the numbers involved are irrelevant. If we are, as he agrees, to have a prices and incomes policy it cannot be a policy only for people who choose to co-operate in it and who choose not to oppose it in militant fashion. Equally, it cannot be a policy simply for large firms. It must be fair and must be seen to be fair. The first requirement of fairness is that the policy should be of universal application, irrespective of the sizes of the agreements, irrespective of the number of men who are encompassed by an agreement.
Certainly, the size of the agreement, and the number of men involved, should in no way suggest that this agreement would not have repercussions in other drawing offices throughout Scotland. To my mind, there is no doubt that if this agreement had gone forward, it if had been allowed by the Government, if it had automatically been approved by my right hon. Friend, hundreds more—and I use the word "hundreds" after some consideration—hundreds more specific agreements might have been made involving increases of similar or comparable size. I say again that this one agreement, or hundreds more which might have resulted from it, may well be in conformity with the prices and incomes policy. If this is not the case, and if that is the judgment of the Prices and Incomes Board, then we were right to stop this one, and stop others which might have flown as a consequence of it.
I turn to the sequence of events which, as my hon. Friend says, began effectively on 8th September, 1967, when the Ministry of Labour was notified of pay increases agreed between the firm and D.A.T.A. which would have had the operative date of 1st December, 1967, and offered a new pay scale of £20 a week for a man of 21, rising to £24 10s. at 30.
It amounted to increases of between £3 and £5 for young men at the bottom of the scale. It amounted on one scale to increases of £2 10s. for men of 30 and more and, since the firm operated three scales according to proficiency, a man on the highest scale who would not have benefited by the proposed maximum of £24 10s. negotiated individual and personal increases. According to my information, because of this individual increase the award would have resulted in increases for everyone of the 15 men. Implementation would have resulted in an average increase of about 8·4 per cent. throughout the firm.
These increases must be set against the background of two facts which were very much in my right hon. Friend's mind when he was considering the specific agreement. The first was that on 16th May, 1967, he made a reference to the National Board for Prices and Incomes of
the pay and conditions of non-manual workers in engineering,
and he was therefore anticipating some general guidance as to how such men should be paid. The second fact against which this must be set was the July, 1967, offer of the Engineering Employers' Federation to draughtsmen under its National Agreement. That offered increases of 30s. at 21, tapering to £1 at 23 and above. That offer was rejected by D.A.T.A., but was reported subsequently by the Ministry of Labour and the Secretary of State for Economic Affairs.
On 18th September, 1967, the Minister of Labour wrote to the company asking that at that time any increase to its draughtsmen should not exceed the offer made to them by the Engineering Employers' Federation. He also asked that its pay policy should be guided by the conclusions of the Report of the National Board for Prices and Incomes which we awaited. We told the company that we


anticipated that the report would be ready on 1st December last year. In fact, it was not ready until 13th December, but we hoped that, whenever it was ready, the company would be guided by it in deciding its pay criteria and pay levels.
On 19th October last year, that advice was repeated, and in the Minister of Labour's letter to the firm it was referred to two sets of criteria. The first was those laid down in Cmnd. 3235 outlining the objectives of the Government's prices and incomes policy. The second specifically referred the firm to Report No. 36 on Productivity.
The firm replied to that letter, and its reply was in direct contradiction of some of the facts outlined to the House by my hon. Friend. The letter said that the firm had "examined the criteria". It went on to say that it had
no measurement of efficiency prior to the scheme.
It concluded that it was therefore
unable to state a measured increase in productivity
flowing from this pay increase. By any standards that was a virtual agreement that the criteria of increased productivity did not apply.
Having had that admission and that bald statement, according to the productivity criteria, there could be no justification for the pay increases proceeding. My right hon. Friend awaited the outcome of the firm's deliberations. The firm reported that, if the report of the National Board for Prices and Incomes was not ready by 1st December and if legislation was not invoked to compel the firm to withhold the wage increases, it would pay them on 1st December, 1967.
On 8th December, the firm wrote again saying that the agreement had been implemented, and on 13th December the Board's report was published. It was unequivocal about pay to draughtsmen. It said:
No general increase can be justified above the offer which has been made and approved implicitly by the Ministry of Labour.
The offer was made with the Engineering Employers' Federation's agreement and the implicit approval had been given by the Minister of Labour in his letter to Beckman Instruments and other companies. in that he said that he hoped

interim awards before publication of the Report would be limited to that level.
It was at this point that the negotiations to which my hon. Friend takes exception began between the company and my right hon. Friend. If there is to be a voluntary incomes policy, a voluntary incomes policy perhaps backed by statutory provision but very largely relying on the cooperation and good will of the parties involved, it is absolutely essential that, before a reference is made to the N.B.P.I., and before a direction is made preventing a wage increase until the National Board has reported, every step should be taken to encourage the firms involved voluntarily to limit their wage increases and to encourage the trade unions taking part to accept a voluntary postponement of the improvement until the National Board has reported. This is the sort of procedure which continued from 1st February onwards.
The significant dates which follow that initial discussion are 14th and 15th February. On the 15th officers of my Ministry had a meeting with the firm. It was then that we first heard of measures to improve efficiency which have or have not been costed—I think that is still a matter of dispute—but there is certainly no assurance that these measures to improve efficiency are directly linked to the pay increases which the House is considering this evening.
On 14th February D.A.T.A. wrote to the Ministry of Labour a letter which we received on the day on which we were meeting the firm. The Association's contention was certainly not that this was a productivity agreement. The Association said at the time that a survey of the work being performed was being carried on. No doubt the Association meant to imply that, when the survey was completed, it would be in a better position to judge whether there was a productivity element. The main argument the Association advanced was that the firm's range of salaries did not pay sufficient regard to skill and was certainly out of line with the salaries paid in neighbouring companies.
As a result of this, on 24th February the reference was made. It was made after the usual consultations, which in themselves take time. It was made after the T.U.C., the C.B.I., the E.E.F., the


appropriate trade union, and the firm had been notified and consulted. But it was made after those processes in the knowledge that, though there was delay, it was very much better that the firm should be taken into the Ministry's confidence and should discuss it informally before the die was cast and the report was requested.
I should make clear to the House, and perhaps through the House to people in the locality, the nature of the investigations that are going on. I know that my hon. Friend was given information about the sort of people who were carrying on this investigation for the Board, information that led him to believe, perhaps reasonably, that they were in no way equipped to carry out this task. The first gentleman involved was described, rather offensively, I think—not by my hon. Friend but by people who spoke to him—simply as an ex-colonial civil servant. I think that the person concerned held that position in the past. But now he is a full-time officer of the Board who had worked on the general engineering investigation and the general engineering report and who naturally was sent to do the follow-up investigations into the specific claims, reports on which flowed naturally from the original general report.
The second man involved in the investigations was described in a local newspaper as a university student and therefore was regarded as ipso facto inappropriate for such an investigation. He was in fact a lecturer at the City University who was a special industrial adviser to the Board, who had for five of his working years been an adviser on industrial and economic matters to the National Union of Mine Workers, and who was, in my view and in that of the Board, particularly well qualified to give expert and direct advice about this particular matter.
As to the advice which these two gentlemen give, I repeat that I make no judgment. What is happening in this case is that the Board, after consideration, will make a recommendation to my right hon. Friend on whether or not these increases—on average 8 per cent.—can be justified within the terms of incomes policy.
I say again that if the Board decides that the agreement, in whole or in part, conforms with the incomes policy, my

right hon. Friend is required to allow the increase to be implemented at once. If it does not, the matter is quite different. If it does not, a very serious situation will have been prevented from coming about. The repercussions which would have been certain will have been prevented. The feeling that it is possible to escape the rigours of the incomes policy will have been defeated. The line will be held on incomes policy, and other individuals, other groups, other unions, and other companies which have made voluntary agreements to limit their wage increases will feel that it is not possible to escape through some loophole either because of the militancy of the demand, or because of the number of men involved. I therefore have no doubt that my right hon. Friend was right to make this Order.
I hope my hon. Friend agrees that the case is slightly stronger than it has been made out to him by some people on the spot, and I hope that when the people in the area understand the obligations which were placed on my right hon. Friend they, too, will feel that he took the right decision in operating in the way that he did.

Mr. John Page: I wonder whether the hon. Gentleman would clear up two points. First, will the firm he entitled to retain for a period of 12 months the increment of pay and then pay it as a nest egg at the end of that time under the new regulations? Secondly, if there is a delay, will it be from the date when the payment was first made, or from the date when the Prices and Incomes Board made its report?

Mr. Hattersley: The hon. Gentleman should be asking questions not about what he describes as the new regulations, which I take it are the regulations outlined by my right hon. Friend the Secretary of State last week, but criteria laid down under the prices and incomes policy operating now, and the powers operating at the time of the Order.

The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at seven minutes past One o'clock.